For whom Bell tolls

Real-estate mogul Steve Bell still puts in 15-hour days for his company and investors because he thinks it’s “neat.”
By Chris Roush

In a conference room at his company’s headquarters, a gray-haired man whose 59-year-old physique is beginning to assume the contours of a pear fishes in his pocket for a crumpled Burger King receipt. He points with pride to the senior-citizen discount on his lunch. “I was glad to get that 47 cents.”

Steve Bell wheels and deals, but he’s no slickster. He peppers his conversations with the word neat. “It was a neat opportunity,” he says of buying a Burlington shopping mall in the early ’90s, a watershed for his company. As for why he’s in real estate: “I just thought that being involved in the ownership and management of investment properties would be a neat career.” But details of deals stick in his mind like flypaper: He counts at least 500 since starting his company in 1976.

Greensboro-based Steven D. Bell & Co. owns and manages two-dozen shopping centers and other commercial properties — about 3.5 million square feet — 18,000 apartments and 11 retirement homes in eight states. Its portfolio is worth $1.7 billion. The 675-employee company bought and sold $550 million of real estate in 2004 — its most active year ever. Among those deals was one for its first skyscraper, the 21-story Wachovia Tower in Greensboro, for which Bell agreed to pay $36 million. He’s mogul material.

But moguls usually don’t lunch at restaurants with drive-through windows, show up on their neighbors’ doorsteps toting bags of produce from their backyard gardens or shag on the dance floor with all the swaying grace of the Geico gecko doing The Robot. Bell is the anti-Trump. What’s missing is more than the brashness, bad hair and TV contract. He’s a walking contradiction who works 15-hour days on nine-digit deals while keeping track of his spare change, a guy who relishes the time he spends both at Atlantic Beach and across the Atlantic Ocean on African safaris — he has been to Africa three times and is going again in October. His name graces nothing as splendid as Atlantic City’s Trump Taj Mahal casino resort, but he has hit the jackpot with properties that are heavier on function than flash.

Bell might be the unlikeliest deal king in North Carolina, and who better than himself to put that in perspective. A while back, he was walking from his car to his office when he spotted a penny on the ground. It was muddy, but he popped it in his pocket anyway. “I thought if I ever get so much money that I don’t care about pennies, then maybe my values are changing.”

He has played cards more than 20 years with the same group of guys at Greensboro Country Club — losing, he admits, more than he has won. He prefers playing a hunch when he can perform due diligence on it. But even then, he won’t bet the farm. “The real-estate business is a gamble, period,” says Ed Harrington, the company’s president. “Steve is as risk-averse as you can be in this business.” To understand the man, dissect one of his deals.

It’s an overcast Sunday afternoon. Rain has begun to fall. At Prestonwood Country Club in Cary, autograph hounds troll the course at the Jimmy V Classic charity golf tournament. Nearby at Cornerstone Shopping Center, shoppers shuffle in and out of Lowes Foods. A cop cruises the parking lot. Eleven years ago, this was dirt. Durham lawyer and real-estate investor Richard Drew brought Bell here to visit the 8.4-acre site — ground zero in the direction Drew thought Cary might grow. “This was out in the middle of nowhere,” Bell recalls. But it was near Research Triangle Park, and Cary’s population was exploding — from 21,800 in 1980 to about 100,000 now.

Drew developed the shopping center, leasing all its space before construction was finished in 1995. Bell kept the site in mind, though. “It was next to a couple of schools, and I knew mothers might often stop by after dropping off their kids.” Retail-sales projections for 1997 showed a growth rate for the Triangle of up to 4.5%, compared with 1.1% for the rest of the state. A 302-unit apartment complex was being built next door.

Bell swung into action. He sent an acquisition summary to potential investors — mostly high-net-worth individuals such as doctors and lawyers — detailing the property’s tenants and possible return. He asked for a minimum investment of about $125,000. Dozens responded — he won’t disclose any names — and Bell cut a deal with Drew, who died in 2003.

“We complained but thought we could still generate an acceptable return,” Bell says. “We try to never pay asking price, but with that one, we probably paid close to it.” His company bought an 80% stake in Cornerstone for $8.65 million in April 1997, with 12 investors pumping nearly $2 million into it. The company assumed a mortgage. Bell invested about $110,000 of his own money. “I probably invest in 95% of everything we purchase.”

Sales at the shopping center’s anchor stores grew more than expected. Lowes Foods’ rose to $15.1 million in 2000, up 15% from 1996, and Eckerd Drug, which took over the original Kerr Drug location, reported 2001 sales of nearly $6 million — almost triple Kerr’s 1996 total. Higher sales led to higher rents and bigger quarterly payments to investors. The average annual return was about 37%. Cornerstone was thriving, but Bell was getting itchy. The deals are like marriage, but he thinks ahead to the divorce even before buying the ring. “We don’t want to fall in love with a piece of property. The time to sell is when it’s performing well, not when it’s performing poorly.” Bell sold Cornerstone to Goldsboro-based Centrex Properties in June 2002 for $10.7 million — 23.7% more than it paid. Before taxes, the company had $4.46 million in principal and profit to give investors on top of the quarterly payments they had received.

Cornerstone was a bread-and-butter deal for Bell. It’s brick. It’s low-maintenance — little was spent on renovations. It’s the kind of property that has made money for him and his investors since he started his company nearly 30 years ago. A native of Little Washington, he grew up in Raleigh where his father was a dentist and oral surgeon. Some small-town ways stuck. “He has a garden every year,” says Mitch Oakley, a friend and managing director of Greensboro-based Charles Aris, an executive-search company. “He plants it, he hoes it, and then he’ll show up at your door with tomatoes.”

Entering Carolina, Bell didn’t want to follow his dad into medicine. But he proved no credit to accounting, his first choice. “If I was struggling in accounting, I definitely would have struggled in medical school. And that just didn’t excite me.” He changed majors and graduated in 1967 with a bachelor’s in history, then took real-estate courses for a year at East Carolina, the only school in the state that offered them then. Real estate, he thought, is like an oil well pumping day and night. “It is over here generating rents and income on a monthly, quarterly, annual basis. You every now and then have to put money in it.” Like laying the groundwork for a deal, he developed an eight-year plan for the creation of Steven D. Bell, junior mogul.

He joined the Raleigh office of Cameron Brown Co., a mortgage-banking subsidiary of First Union, in early 1969. He soon was transferred to Greensboro, where he evaluated real estate. “I learned how to value properties. I learned to recognize good locations. I learned something about finance. I thought I would learn something about mortgage banking and then go into sales.” Two years later, he moved to Richardson Corp. as a real-estate broker specializing in investment property. He learned to structure limited partnerships and bring investors together to purchase properties. He also gained confidence and sales skills — and contacts. The Richardson family had made its fortune off Vicks VapoRub, and the Greensboro company had investment clients such as former Gov. Luther Hodges. “I was just a kid in my 20s, and I didn’t have a lot of high-net-worth peers. They introduced me to a lot of folks who had significant income.”

He launched his own company in late 1976, recording about $4 million in transactions the first year. Among its first properties was Carolina Apartments in Carrboro. The company put up $400,000 cash from investors and bought it for $2.75 million. “A few years later, we were sending our investors between $300,000 and $400,000 per year in cash flow,” he says. The company held it 20 years — an unusually long time — selling it in 1997 for $7.5 million.

Steven D. Bell & Co. grew slowly, acquiring apartment complexes and shopping centers. Early investments included Mayberry Mall in Mount Airy and Quaker Village Shopping Center in Greensboro. In the early years, Bell says, it was hard to attract people to Greensboro to work for him. “Charlotte, Atlanta and Raleigh had more sizzle. There was more to do for young people.” It didn’t help that he didn’t pay much. “I basically wanted people to come and love our company. Once they came and proved themselves, I was very willing to pay them.” The company now has an Atlanta office. And it pays better.

Then came Holly Hill Mall in Burlington, the 1991 deal that gave his company its big boost. Bell agreed to pay $14 million, but it was going to take $10.5 million cash. He never had raised more than $3.5 million. He called on clients who had sold a textile company. They agreed to assume 40% ownership. Most of the rest came from other investors, and the seller financed the remainder. “Once we raised that $10 million, we realized we had the ability to go after bigger deals, nicer deals, newer deals,” he says. The 400,000-square-foot mall was about 15% vacant when he bought it. Bell made about $2 million in improvements, including adding a food court and attracting a Goody’s department store. He sold it six years later for $30 million.

As the company and size of its deals grew, Bell handed much of the day-to-day duties to Harrington, a former mortgage banker he named president in 1998. That freed Bell to build an assisted-living division. “To grow,” Harrington says, “you have to let go somewhat and let other people run the ship. That’s difficult for all of us to do. We went from a flat company to putting meat on the bone.” The assisted-living division was a departure from Bell’s initial vision for the company — he had decided early to specialize in apartment complexes and shopping centers. “But we thought that if we don’t get involved with this business, this industry, this type of investment, we’ll find it increasingly difficult because some of the people will get bigger and bigger and bigger, and we’ll just be a tiny little fish trying to get involved.” He had no intention of being swallowed.

It’s Thursday, and Bell is on his way from Greensboro to Asheville, starting a long-weekend swing that will take him from western North Carolina through Georgia, to Atlanta, Macon and Savannah. He’ll look in on company properties but also court new investors and reassure current ones. Profits, he says, aren’t the only way to keep investors happy.

Ten years ago, Steven D. Bell & Co. spent less than $2,500 a year entertaining clients. Now, that might not cover tips for the 60 crew members on the German-owned Sea Cloud, a 360-foot sailboat commissioned by financier E.F. Hutton in 1931. He has been on it five times and chartered it once to entertain the company’s biggest clients. Bell has learned to cultivate his relationships with the wealthy. “When I was younger, I was hungry, and I would often sell something, then go out looking for new investors,” he says. Now about 80% of what he raises comes from repeat investors.

His son, Jon, 32, joined the company in 2001. He has a bachelor’s in real estate and finance from the University of Georgia and an MBA from UNC Chapel Hill and worked for Charlotte-based Faison and Associates. Much of his education, though, came closer to home — from his father. “He would tell me things at an early age that, in hindsight, no kid could understand. He’d point out an apartment complex being brick. At the age of 10, I couldn’t care less. But later on I realized brick was low-maintenance.” His other son works in apartment real-estate development in Washington, D.C., and his daughter worked for the company in the ’90s.

Growth is what Steve Bell had in mind when his son came aboard. Jon Bell specializes in attracting institutional investors such as insurance companies and banks. Five years ago, Harrington says, the company had one institutional investor. Now about 35% of the money it invests in real estate each year comes from them. The 21-story Wachovia Tower in Greensboro will have at least one institutional investor, and 65% of Bell’s biggest deal, $100 million for eight Knoxville, Tenn., apartment complexes, comes from Wachovia Securities.

The difference, Steve Bell says, is like baseball. Wealthy individuals want steady base hits. Institutional investors want to swing for the fence. “If you want to go after the $100 million acquisition, then that just takes too many individuals,” he says. Now he’d like to see more home runs.

The successful deal, he says, comes full circle. He wasn’t finished with Cornerstone Shopping Center in Cary when he sold it in 2002. Its legacy can be traced here to another shopping center, Falls Village, in north Raleigh. On a cool Saturday night, the patio at Stonewood Tavern & Grill is full of diners. Automatic doors swish open and shut at a Fresh Market grocery. Across the street, cars dart into the parking lot at North Ridge Country Club.

When Bell closed out Cornerstone, he went back to its investors and proposed that they roll their money into Falls Village. It’s a tactic he uses often, letting investors defer capital-gains taxes through an IRS 1031 tax-deferred exchange. Ten anted up nearly $3 million. Behind the scenes, Bell hustled. Atlanta-based BVT Development owned the 168,000-square-foot Falls Village, which was built in 1974, and had added a brick façade and brought in new stores. But it also had angered tenants, who claimed construction work led to lost sales.

As with Cornerstone, negotiations were short. In June 2002, the same month it sold Cornerstone, Steven D. Bell & Co. bought Falls Village for $25 million, with $6.4 million cash from Bell and his investors and the rest — $18.6 million — in debt held by Wachovia. Bell ripped into the shopping center, changing store facades and bulldozing a dry cleaner to make way for a 14,000-square-foot building for a new tenant, expected to be Books-A-Million.

The moves have paid off. Bell distributed $1.25 million in payments to Falls Village investors in 2003. Only four of the other 18 retail real-estate properties the company owned in 2003 had a higher return. Bell says the company will hold Falls Village for six to eight years. Then the honeymoon will end. He will look for new buyers, and the deals will go on.