Buy or sell? Real estate guru is stumped

Harold Brown is 88, and he is still doing real estate deals. He is one of the region's biggest landlords with $1.4 billion in his portfolio.David L. Ryan/Globe Staff

If anyone can benefit from experience in the fickle real estate market, it’s magnate Harold Brown who, at 88 years old, is still making deals.

During the Great Recession, when everyone else was selling, Brown was buying, to the tune of $300 million in apartment buildings, most of which have risen dramatically in value over the past few years. His empire is now pegged at $1.4 billion, higher than ever, making him one of the biggest landlords in the Boston region, with some 5,500 residential units and 2.5 million square feet of commercial space.

For six decades, through price plunges and market surges, Brown has bought and sold properties, and he’s come out solidly on top. So Harold, everyone who owns a home or dabbles in real estate wants to know: Is this a good time to buy or sell?

“It is the first time I can’t predict,” he said.

Not the answer you expect from the chairman and chief executive of The Hamilton Co., which he still runs from a modest building on Brighton Avenue in Allston. During our talk there, Brown was sharp and witty, and not just for an octogenarian. His tennis days are over, but he still goes to the gym every morning and is in the office by 9 a.m. He has no plans to retire any time soon.

Why can’t Harold predict the future? He can’t get his head around the unprecedented number of apartment units being built in Boston and its immediate suburbs. By his count, close to 8,000 new rentals will flood the market over the next few years.

Adding to Brown’s uneasiness is the fact that a good number of those homes are being built on the South Boston Waterfront, which became the most popular parcel in the city after Mayor Tom Menino rebranded it the Innovation District. Tech companies, priced out of Kendall Square in Cambridge, have flocked there over the past couple of years, and now developers are chasing the geeks who prefer to eat, work, play, and live in the same neighborhood.

“Much of the boom is due to start-ups,” said Brown, which he finds a bit worrisome because they “have a high mortality rate.”

Apartment buildings are sprouting because that’s what banks were willing to finance after the 2008 housing bust. In the city, there are about 5,000 residential units under construction, of which all but 500 are rentals, the Boston Redevelopment Authority says.

View from 315 on A, one of the new apartment buildings in the Seaport District.Shirley Leung/Globe Staff

In a way, that means lenders decided it was safer to bet on rental housing for employees of start-ups than to finance condos that are in short supply and going for record prices.

These are the same banks, Brown reminded me, that wrote “no doc” loans in the last cycle — signing off on mortgages without requiring proof of much of anything from borrowers. That’s when he knew the last real estate boom was about to end.

To Brown, the current market feels “bubbly,” given the overbidding in parts of the residential market and the increasing influence of foreign investors. For example, late last year, he tried to buy a property in Harvard Square, which was listed at $24 million. He bid $21 million. An investor from China bought it for nearly $30 million in cash.

Brown is still buying, including an apartment complex in Andover for $62.5 million last month — but ever so cautiously. His company got swept into Chapter 11 bankruptcy reorganization during the real estate bust of the late ’80s and early ’90s, and the scars are still fresh all these years later.

But gone is his reputation as Boston’s most infamous landlord. In the 1980s, some painted Brown as a slumlord, and he even pleaded guilty to bribing a building inspector. Now his company helps plants daffodils along Brighton Ave.

And if there is another real estate bust, don’t worry about Harold Brown. He estimates he can lower rents nearly 40 percent and still break even, thanks to his strategy of buying very low and holding very long.

So what if the worst-case scenario happens and too many apartments get built? Landlords could slash rents, and to pay off their construction debt some may need to convert rentals into condos.

In a city with some of the highest housing costs in the country, what’s bad for the Harold Browns of the world might not be so awful for tenants and people looking for cheaper places to live.

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