Pettigrew Sees Opportunities In Real Estate

Four and a half years ago, Benjamin V.A. Pettigrew '99 banded together with four siblings and an old friend to buy and old office building in Dallas. Two years later, his firm, Oaksbranch Investments, L.C., sold the building for an 80 percent profit.

Oaksbranch now owns $4.9 million in assets in four states, and Pettigrew hopes to expand the company after he graduates.

Requiring more capital than traditional student businesses, such as web design, real estate investment is a risky form of speculation; investors are subjected to the harsh market cycles that characterize the industry. Pettigrew, whose father also runs his own real estate business, grew especially interested in the business after his group came across their first deal.

The first deal was by any measure a sweet one. He and his partners, which include his brother Charles, now Oaksbranch's president, and his friend Mike Starcher, noticed that a single-tenant office building was significantly undervalued. "At that time, the market was still slightly depressed from the real estate crash in the late 80's," Pettigrew says.

Taking into account the occupants' plans to renew their lease, and setting up a buyer in advance, the group moved on the deal. They borrowed most of the money from a bank and the down payment from Pettigrew's father's company. After two years, as planned, the building was bought by a Post Office for 80 percent more than Oaksbranch had paid for it.

The partners were able to net nearly all of the gains, since the deal was so highly leveraged. Additionally, they avoided paying taxes on the profit by rolling their gains directly into new properties.

This success foreshadowed at least seven other completed deals, with a bunch more in the works. These deals include an interest in a California golf course, some residential and industrial properties in the Dallas-Fort Worth area, and recent deals in Illinois and New Mexico.

Real estate, however, is a risky business. "We once have had the pleasure of holding a property a little longer than we initially planned because we underestimated the time it would take for the county to construct a road through our property. We counted on that road to enhance this parcel's value, but we also made the mistake of relying on the county to construct that road on a timely basis," he says.

Pettigrew's brother, Charles, the president of Oaksbranch and a civil engineer, acknowledges that some of the investments, including an industrial property yet to be sold, would be considered high risk.

Says the older Pettigrew: "We have learned to take measures to insure against a downturn by choosing investments that will fall back into demand the most quickly as the market recovers, or ones that can be paid off fully within the first lease agreement."

Pettigrew says his father was a major factor in the decision to pursue the first deal. Says Pettigrew, "You might say that he has been our inspiration and role model from the beginning."

As a business philosophy, he believes that the dual goals of making money for the business, and keeping equity and lending partners happy can be satisfied, by involving these outside partners in good deals.

Charles adds, "Ben has always known that the most important thing in the business is your reputation."

Pettigrew, a history concentrator from Arlington, Texas, spends from five to ten hours a week working on projects for his business, typically working more hours during vacations. He would like to continue with his commitment as Vice President of Oaksbranch after college, though he is also weighing other options, including graduate school and other jobs in business.

His brother Charles remembers Pettigrew's initial enthusiasm for the business, and the aptitude for business that he has shown since then.

He recalls how Pettigrew received a quick lesson in business by researching one of their more difficult properties during a trip to a city engineer's office with a notebook full of concerns.

Someday, "Oaksbranch will require full-time commitment, and he would love to devote himself to its growth and success," Charles says. "There are more deals on the horizon, and even opportunities to diversify."