Kirk Kerkorian lost fights, bets, and billions of dollars on the way to becoming the father of the Las Vegas mega-resort.
Jon Gray, CEO of Blackstone, uses his domain expertise to confidently deploy capital in markets other experienced investors fear to tread.
Carl Berg went from doing odd jobs in rural New Mexico to a billion-dollar net worth on the strength of his professional network.
Each of these commercial real estate legends had a different approach to winning that played on their individual strengths. Their stories teach foundational lessons of CRE success while inspiring investors to find their own unique path to greatness.
Kirk Kerkorian, self-made real-estate and media tycoon (plus champion amateur boxer, WWII pilot, and high-stakes gambler).
Kirk Kerkorian dropped out of the eighth grade, once lost $70 million in a single deal, and saw 80% of his fortune disappear near the end of his career. But each time the self-made billionaire took a hit, he’d bounce back and accomplish another amazing feat.
It wasn’t just toughness that kept Kerkorian going—although as a former amateur boxer and daredevil pilot, he had plenty of that to spare. Kerkorian’s superpower was in his perspective. To him, a setback was a lesson to fuel the next big idea, not a career-defining event.
“Sometimes you lose, but that’s the nature of the game,” he said in a Time magazine article in 1970, as reported by the New York Times. “There’s always another game and another chance to win.”
Born poor in 1917, Kerkorian learned how to deal with setbacks early in life. His father, a fruit merchant and Armenian immigrant, landed the family on hard times after losing his farmland during a recession in 1920. Out of desperation, the family relocated to Los Angeles in search of any opportunity to keep afloat. “We moved at least 20 times when I was a kid,” the New York Times reported from a 1969 Fortune Magazine article. “We often could not pay our rent and would get booted out.”
Kirk Kerkorian, a skinny kid who learned English “on the streets,” was a favorite target of bullies in the city. Constant fighting landed him in reform school, where he would drop out with the equivalent of an eighth-grade education.
Without family money or much education, it could have been a bleak and short story for Kerkorian. But he chose a different way out. After some training from his older brother, Kirk “Rifle Right” Kerkorian won 33 of 37 amateur boxing matches along with the Pacific Amateur Welterweight title.
It was a theme that would follow Kerkorian throughout his life: get knocked down, then use what the experience gave you to do something bigger.
Kerkorian never seemed willing to just accept the hand he was dealt. Instead, he’d create his own opportunities then turn them into unimaginable successes. Like the time he mucked sties and slopped pigs in exchange for flying lessons, started an airline, then cashed it out for $100 million.
It started while Kerkorian was still boxing and working odd jobs. His coworker, an ex-Navy pilot, took Kerkorian for a lunchtime spin in his plane. Kerkorian instantly fell in love with flight, but flying lessons weren’t within reach for an uneducated laborer just trying to keep food on his family’s table.
Undaunted, Kerkorian hitched a ride to the Happy Bottom Ranch Riding Club—a dude ranch owned by famed aviator Florence “Pancho” Barnes and frequented by many of the world’s most accomplished test pilots. There, he offered Barnes a deal: he’d feed and clean up after the ranch’s hogs, and she’d give him flying lessons.
Literally and figuratively, everything took off from there. In six months’ time, Kerkorian qualified for a commercial pilot’s license. He landed a gig ferrying warplanes across the Atlantic for the British. After the war, he used his savings to buy, fix, and resell surplus military aircraft. Then Kerkorian used those profits to start an air charter operation, sold that to Studebaker, bought it back, and resold it to Transamerica, netting over $100 million dollars in the process.
Kerkorian never measured success by a single deal. He put wins and losses into the context of his whole career. That perspective allowed him to bounce back after losing $100 million in a matter of months to then build the world's largest casino...for a second and third time.
Kerkorian’s love affair with Las Vegas, and commercial real estate dealings, began in the early days of his air charter service. He’d often fly actors, mobsters, and other west coast elites from LA to Vegas. Before long, Kerkorian was joining his clients at the gaming tables, gaining a reputation as a high-roller himself. Eventually, he’d make a different kind of bet in Las Vegas, using some of the profit from selling his airline to purchase a large parcel of land just off the Strip.
Kerkorian found his groove as an investor. In just a few shrewd moves, he had a 40% stake in media giant MGM, created a holding company for his real estate assets—International Leisure Corporation— and took it public, and built the world's largest casino, the International.
That’s when things took a nosedive. A deepening recession crushed profits across all of Kerkorian’s investments, leaving him over-leveraged and hemorrhaging cash. After failing to secure another public stock offering, Kerkorian was forced to sell half his interest in International Leisure for $21.4 million to Hilton, far less than it was worth less than a year earlier. His net worth plummeted by $100 million dollars almost overnight, and the high-flying former pilot was on the verge of crashing.
The bounce-back was the stuff of legend. Kerkorian convinced MGM leadership (he still controlled nearly 50% of the company) to borrow $75 million dollars and build an even larger casino than the International. The two-thousand-room MGM Grand opened in December of 1973. Kerkorian was once again king of the Las Vegas mega-resort.
That wasn’t the last roller coaster of Kerkorian's career. He'd have spectacular wins. His real estate company, which would become MGM Resorts International, grew to one of the largest resort brands in the world. He'd also top $14 billion in net worth, according to Forbes.
The losses were equally as spectacular. Poorly timed investments in the Ford Motor Company and a final Las Vegas real estate deal, the CityCenter, cost Kerkorian about 80% of his wealth.
But only in death, at the age of 98, did Kirk Kerkorian finally stop swinging.
“You can never tell if Kirk is up $10 billion or down $10 billion,” former MGM CEO Alex Yemenidjian told the New York Times in 2009. “To him, it’s just a bump in the road.”
Jon Gray, President and COO of Blackstone, driving force behind the private equity firm becoming the largest owner of property globally.
Jon Gray once took a romantic poetry class during his studies at the University of Pennsylvania. In fact, it’s where he met his wife. But Gray didn’t really fit in. “I showed up wearing a suit and tie,” he said in an interview for Bloomberg. “Everyone else was in Birkenstocks.”
Jon Gray with his wife, Mindy Gray. Image retrieved from Forbes.
Even then, Gray was committed to staying true to himself. It’s a trait he’d apply throughout his career investing in commercial real estate and the companies that own it. He calls it “investing with conviction,” and it’s what allows him to place billion-dollar bets with confidence—even when others are fearful or slow to move.
“[Gray has] amazing courage of being able to always go where they’re not,” said Tom Barrack, the billionaire executive chairman of Colony NorthStar, Inc. “To go public to private, to go bulk to individual, to be able to have a balance sheet, to be able to bridge large transactions and then co-invest.”
Gray started out ordering dinner and writing pitch books for a small private equity firm in New York. When it came time to run a deal, he was all in.
“The first deal I worked on was a shopping center in Chesapeake, Virginia,” Gray told Bloomberg. “It was a $6 million transaction...you would have thought I was buying the island of Manhattan. I was down there for three weeks. I met every tenant, I was counting the car traffic, I was learning the business.”
Soon after, he went to work for Blackstone and quickly joined the firm’s nascent commercial real estate division. Gray says being in those startup environments, where you get to learn the business first hand, is an “amazing experience” everyone should have.
“Take a risk,” he said on a recent Talk at GS podcast. “Move to a different country. Go to that new startup division. I came to Blackstone in private equity, and they started a real estate business about a year into it. Being able to learn, that was hugely important.”
By 2005 Gray was running Blackstone’s real estate business. And in ‘07, he was presented with one of the biggest opportunities of his career thus far: buying Hilton Worldwide, one of the largest hotel brands in the world, and taking it private.
There was a catch. It was 2007, and the world was in the throes of a financial crisis. People weren’t traveling, and Hilton was anything but a safe bet.
“We had to put a bunch of money [into Hilton] at the bottom of the market,” Gray says. “People thought we were crazy.”
The deal paid out in a big way. Gray’s move ultimately made his firm and their clients $14 billion dollars.
It wasn’t luck. It was Gray’s comprehensive understanding of the deal, the company, and the market. “We believed in the management, we believed in the business, we believed hotel demand would return,” he said. “We had a lot of conviction in a challenging time.”
Confidence built on knowledge became Gray’s stock and trade. “Jon would mark up every earnings release and would go line by line through everything about real estate and the rest of the firm,” said Laurence Tosi, Blackstone’s chief financial officer from 2008 to 2015. “He would be able to catch a number wrong out of thousands. And he was almost always right.”
In 2020, the pandemic flipped commercial real estate on its head. But it didn’t result in a long period of low-cost opportunities like previous economic downturns. Central banks and governments responded quickly, putting a “floor under the market,” Gray said in the Talk at GS podcast.
The result was a constrained period of opportunity—and only those able to act quickly and confidently could come out ahead.
In March and early April of 2020, right at the most economically tumultuous period of the pandemic, Gray said his team deployed $11 billion dollars in capital and are doing “very well with those investments.”
The reflex to successfully react to a near-instant shift in economic conditions comes from experience and a laser-like focus on the areas they know best. “The market’s moving quickly,” Gray explained. “Where do we have domain expertise? Where do we have confidence?”
To become a high conviction investor, the type that moves with confidence in every type of market, Gray says you can’t dabble.
“When you dabble and just put a bunch of money here on things you don’t know or understand, it tends to work out badly. But when you see something, single-family housing, global logistics, the movement of everything online, and you lean into that, that’s when you have the best outcomes.”
Carl Berg, self-made commercial real estate entrepreneur and venture capitalist.
While most kids at his Tucumcari, New Mexico (pop. 6,000) high school were fretting over homework or who they’d take to the dance, Carl Berg was busy building his professional network. That’s when Berg—who worked as a pinsetter, among other jobs, to help keep his family afloat after his father died—met the owner of a nearby Dr. Pepper bottling plant.
Not many people in Tucumcari were drinking Dr. Pepper in the mid-1940s, Berg said in a video interview with NAIOP. So the teenaged Berg offered the owner an opportunity: loan him a truck and let him sell the soft drink for a percentage of the profits.
It wasn’t long before every store in town had Dr. Pepper on the shelf. Berg joked that even the holdouts bought a few cases just so they could tell him they had it. Back at his high school, Dr. Pepper was soon outselling every other soft drink by a 26-to-one margin, Berg said.
That was the first in a series of professional connections Berg would make over the next 70-plus years. Whether it was sponsors, partners, or advisors, Berg built a billion-dollar business on the strength of that network.
Rural New Mexico isn’t the ideal starting line for a career in high finance. So Carl Berg leveraged the experience he gained as a bellhop in a roadside motel (yet another gig to save the family and pay his way through college) to secure a front-desk job in Albuquerque's finest hotel.
The plan was to network with successful investment bankers and land a job on Wall Street. It worked, sort of.
The man Berg met was indeed an investor, but of real estate companies, not Wall Street securities. Still, Berg saw the opportunity and found himself processing loans for his new sponsor’s mortgage company during his junior year of college.
Berg would parlay that job into running the entire mortgage company after graduation. That wasn’t the last time Berg would connect with people who could open the doors he wanted to walk through.
Berg left the mortgage company and headed west to California. Eventually, he started selling residential real estate and met John Sobrato—a handsome, smooth-talking salesman. The two regularly battled for the top spot on the sales leaderboard, with Sobrato usually winning, according to Berg.
If you can’t beat ‘em, join ’em. Berg struck up a partnership with Sobrato first to sell, then to develop commercial real estate. The two, along with Sobrato’s mother, leveraged everything they had to buy a one-acre lot in booming Sunnyvale, California, for $45,000.
That one deal snowballed into a near-decade of incredible growth. Over the next eight years, Berg and Sobrato would go on to build over eight million square feet of commercial space, leasing much of it out to soon-to-be tech giants like Cisco and Apple.
In 1981, a former Hewlett Packard researcher named George Hwang asked Berg if he’d like to invest in his new computer chip manufacturing operation. Berg had already stuck his toe into the venture capital world, sometimes trading office space for a stake in cash-strapped startups. There was just one problem. As Berg put it, “I know nothing about technology.”
What Berg did have was a deep bench of technologically astute advisors, many of them heads of companies that leased space in his buildings. On the strength of their recommendation, Berg placed a big bet: $1.3 million in cash and a brand new factory in exchange for shares in Hwang’s company, Integrated Device.
The bet paid out handsomely. Berg sold the bulk of his stake in Integrated Device several years later for $76 million dollars.
Berg’s network continues to help him navigate deals in the tech industry, including a $1 million dollar investment for a 25% stake in Sun Microsystems. That deal only happened because Sun’s co-founder, Scott McNealy, had worked with Berg in the past and offered him an early option to invest. “I actually did absolutely nothing to get Sun and it was one of my all-time great winners.” Berg cashed out his Sun stake for $59 million.
Kerkorian, Gray, and Berg took different paths to billion-dollar careers. But collectively, their experience can teach us a lot about what it takes to make it as a CRE investor.
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