Exclusive Q&A: How Integrated Capital's Ken Fearn Seized Opportunities, Cultivated Relationships To 'Break Into The Club'

For Integrated Capital CEO Ken Fearn, a former investment banker, stepping into real estate and eventually opening his own firm was driven by new opportunities and supported by building relationships. We recently chatted with Ken, who's among the all-star panelists at Bisnow's Lodging and Innovation Series, an all-day extravaganza April 28 at the Sheraton Downtown Los Angeles.

Bisnow: How did you get started in commercial real estate?

Ken Fearn: I fell into the real estate business. I was working as a consultant at McKinsey & Co, and I was just beginning to think about my next steps when I met with Lew Wolff, the father of a business school classmate. We had spoken on several occasions, and I was intrigued with his business and the entrepreneurial nature of his firm.

I ended up joining him at Maritz, Wolff & Co in 1995 following the launch of the firm’s first investment fund focused on hotels and resorts. The firm went on to raise $500M in private equity funds focused on hospitality assets. We acquired a number of luxury hotels and resorts such as Four Seasons Biltmore, Santa Barbara. The firm also acquired the Fairmont Hotels brand with Prince Alwaleed and purchased a 50% interest in Rosewood Hotels and Resorts.

Bisnow: What attracted you to the industry?

Ken Fearn: I had never considered CRE, to be perfectly honest. Once I got into it and working with the Maritz, Wolff team, I loved that every day was different. The firm had a primary focus on hospitality, but Lew was a developer and entrepreneur at heart, so we looked at a number of real estate asset classes from office and industrial to an occasional condominium development. We even built an FBO facility at Burbank Airport with a partner. The entrepreneurial nature of the business still excites me and fuels our activity at Integrated Capital.

Bisnow: Why did you decide to start Integrated Capital?

Ken Fearn: After about four years at Maritz, Wolff & Co, I started getting calls from headhunters to consider other opportunities. I was a principal at MW and enjoying my career so to consider a change would require a very special opportunity. I ended up receiving compelling offers from two larger real estate private equity firms. One offer was from a Canadian firm to run all US investments for them, and the other was from an East Coast-based firm to run West Coast investments. As I considered these opportunities, I came to the conclusion that I really wanted to run my own private equity real estate investment company.

Bisnow: What has been your strategy?

Ken Fearn: Our strategy has been to identify well-located hospitality assets that we can acquire on an opportunistic and/or value-added basis. We like assets that are broken and provide us with an opportunity to reposition.

We really like assets where we can significantly propel the business forward by investing capital that will directly impact the guest experience. We position assets to increase their occupancy and their average daily rate and generate sound investment returns. We unfortunately don’t have an asset in Los Angeles at the moment. I served as chairman of the Redevelopment Agency for the City of Los Angeles for a few years and felt it would be best not to invest in assets in the city to avoid any potential conflicts.

(Here's Ken at the launch of the Broad Museum, along with Jan Perry, Mayor Antonio Villaraigosa and Eli Broad.)

Bisnow: What obstacles did you face trying to start your own company?

Ken Fearn: I don't think of things in terms of obstacles. In my mind the primary question was what did I need to do to ensure the highest probability for success. I needed to identify assets, capital and build a team. Fortunately, I was able to identify my team early. Two younger associates, Stewart Cushman and Dan Kurz, who worked for us at MW confided in me that they were considering other opportunities. We had a great working relationship, and I was able to convince them to give me a few months while I put the pieces together to launch a new firm. Fortunately, they agreed and I had a team that was amazingly talented. (Ken shown above at work with partners Daniel Kurz, on the left, and Stewart Cushman.)

Bisnow: How did you secure capital?

Ken Fearn: I decided to have conversations with people in the hotel industry where I’d built a little bit of name recognition and reputation and was able to convince one of the hotel brands to sell me a couple assets. Finally, armed with a prospective transaction and a business plan that we felt strongly we could execute, we started the task of raising capital. Aside from being a principal at MW and doing transactions, I was also the CFO and I had built great relationships with lenders across the globe.

One of my German lenders immediately said, "We appreciate the way you’ve conducted yourself in business, and we would like to support you in your new endeavor." They spent about 10 days evaluating our deal, and then gave me a fully committed term sheet to finance 65% of our initial acquisition.

Bisnow: To what do you attribute your success?

Ken Fearn: I think largely it’s having a great team and surrounding myself with great people. Not only my partners at Integrated Capital, but the folks we have relationships with outside of our firm, from the lenders at Wells Fargo Bank and Emigrant Bank to our attorneys at Perkins Coie. It’s really having great relationships with folks we consider the best in the business.

Aside from this I would be remiss to not acknowledge the support I have received from my wife and mentors. My wife was unwavering in her support when I suggested it was time to create my own firm. This was monumental given that I was investing a major amount of our savings in our first deal and we had three young children. As for mentors, I can't begin to say how grateful I am for the mentoring I received along the way from Paul Haaga (retired chairman of The Capital Group Cos), Lew Wolff, John Cushman (chairman of Cushman & Wakefield) and Ron Burkle. I have had great people who wanted to see Integrated Capital succeed and have been great supporters as we built our platform. (Ken is shown here playing golf with golf great Ben Crenshaw, Stuart Bernstein and singer Mac Davis.)

Bisnow: Why aren’t there more African-Americans in commercial real estate?

Ken Fearn: I don't really have the answer to that question, but if I were venturing a guess I would say that it is hard to break into the club. In fact, you don't see a lot of minorities or women in the commercial real estate space. It’s been very difficult for minorities and women to typically have access to capital and become a significant player in the space. I think that’s the biggest challenge for folks, for people of color to get access to capital so that they can actually participate in the CRE space. For me, I grew up in South Central Los Angeles and would have never had exposure to the industry had it not been for the relationships I forged from high school through business school.

Bisnow: Do you think mentoring would help other African-Americans?

Ken Fearn: I think mentoring can play an important role but more importantly companies on both the buy side and brokerage side of the business have to view diversity as an important metric.

Bisnow: What else would you like people to know about Integrated Capital?

Ken Fearn: We’re a firm that’s enjoying our 12th year as a stand-alone business. We have graduated from doing transactions on a deal-by-deal basis to having an institutional fund that includes investors such as Teachers Retirement System of Texas, Teachers Retirement System of Illinois, Exelon, Grosvenor Capital Management, and New York State Teachers as clients. We work diligently every day to ensure that we generate sound investment returns for pensioners who have entrusted us to serve them as fiduciary. We have a solid track record for generating investment returns in our marketplace and never lose sight of our role...to preserve capital and generate sound risk-adjusted returns for our investors.

Bisnow: What do you like to do in your personal life?

Ken Fearn: I try to create memories with my family and give back to the community through charity work. On the family front, my wife and I have three kids who have grown up before our eyes and will soon be leaving us empty nesters. We have a 25-year-old son who is a musician living in Brooklyn, an 18-year-old son who is an avid golfer with aspirations of playing in college next year, and a 16-year-old daughter who is into fashion, photography and blogging. As for community involvement, I currently serve as an Entrepreneur in Residence at the Cornell School of Hospitality Administration, and I serve on the Board of Directors at Loyola High School. I have previously served as the chairman of the Community Redevelopment Agency, the Board of Directors for the Lusk School of Real Estate at USC, The University of California, Berkeley Alumni Association, the Challengers Boys and Girls Club, The Andre Agassi Foundation, to name a few.

To hear more from Ken and our other panelists, join us at Bisnow's Lodging and Innovation Series event April 28 at the Sheraton Downtown Los Angeles. Sign up here!