There is no doubt that Bill Gates still grabs the attention when Microsoft is the subject even though co-founder Paul Allen certainly played his role in the early days. Mr Allen bailed out at what some would describe as a relatively early stage although he was an instant billionaire and his finances have gone from strength to strength. While many billionaires and successful entrepreneurs like to sit back and enjoy their wealth in their later years, Paul Allen seems to have stumbled upon the real estate sector and is making even more money!
Focusing upon Seattle the story of how Paul Allen entered the real estate sector is very different to the path that traditional real estate investors take!
Loan default lead to real estate investment
Through his real estate company Vulcan, Paul Allen loaned $20 million to a non-profit group attempting to create a large park within some of Seattle’s more rundown areas. Unfortunately, the project hit some turbulence and when the group defaulted on the $20 million loan the real estate assets transferred directly to Paul Allen’s real estate company. It would then appear that the billionaire got a taste for real estate with this company buying up an array of offices and apartments in an area known as South Lake Union.
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In what can now be described as teething problems, Vulcan was seemingly a little too enthusiastic in the development of the region in question. As demand for real estate in the Seattle area began to improve the company was far too aggressive building an array of condominiums just as the local real estate market peaked. This was too much for investors in the region and the momentum was lost, prices began to fall and the company was forced to jettison various apartments at a discount.
However, it was around this time in 2010 that the company finalised an agreement with Amazon to build an 11 building headquarters in the region. When you bear in mind that Amazon is a magnet for entrepreneurs, businesses and technology companies, the area very soon began to recover. Vulcan now has in the region of 5,000,000 ft.² of real estate in the area much of which was acquired at a relatively early stage of the recovery.
Cashing in on Amazon headquarters
While Paul Allen is a multi-billionaire it seems as though he does have an array of skills in the real estate market. History suggests that the initial agreement to build the Amazon headquarters changed the direction of the company’s fortunes and the sale of the property to Amazon in 2012 netted the Vulcan an impressive $1.16 billion. Slowly but surely Vulcan is selling off some of the older real estate projects which have grown significantly in value in recent times.
It has been suggested that Vulcan targets developments where the potential gain is in the early teens as opposed to the 5% to 6% traditional range. These are ambitious targets, there will be times when these targets will not be met but Paul Allen certainly has a skill when it comes to real estate. Despite his estimated $17 billion personal fortune he does not seem ready to retire just yet!