It takes longer than is usually customary to reach Jonathan Victor. “I virtually never do this,” he says, “so this interview is uncharacteristic.”
When he’s told about the paucity of information on the internet regarding Balmoral Funds, his private equity firm, there’s another logical explanation. “There aren’t many links,” he says. “I’ve tried to stay off the internet as much as possible and put our portfolio companies’ interests and publicity ahead of Balmoral’s, or mine.”
But Victor willingly explains how he came up with the name for his firm. “When it comes to private equity firms,” he says, “they tend to be named for Greek gods, trees or rocks of some kind, or one’s own name or initials. But I grew up on Balmoral Drive in Palmer Woods, and it makes me smile when I think of that street.
“I have nothing but fond memories from there, so I thought it was the obvious choice. And then there’s Balmoral Castle in the United Kingdom, the Queen’s summer palace, and not that I have any ties to British royalty whatsoever, but it’s a name that has a sense of stability and all the stuff that, as a money manager, you might want to convey.”
Victor’s journey from Balmoral Drive to founder and managing director of Balmoral Funds was a tad circuitous, to say the least. “My grandfather started Victor Paint Co.,” he says, “and after he passed away in the ’50s, my father took it over and wound up changing it into a retail company like Sherwin-Williams. He opened up a whole bunch of Victor paint stores in the late ’50s and early ’60s, and ultimately sold that business. Then he wound up going into the retail furniture business, taking a group of stores out of bankruptcy in the mid-1960s that, at the time, were called Robinson Furniture Co.”
As a kid growing up in the 1960s, life on Balmoral Drive, located near Woodward Avenue and Seven Mile Road, was fairly typical for Victor and his two older brothers. “We went to Grosse Pointe University School,” he says, “which is now known as Liggett. It turned out there was one teacher at the school who was from our neighborhood, and he had a VW van and there were about, I’m guessing, a dozen kids from our neighborhood who would drive with him to school.” Victor attended Liggett from nursery school through fifth grade, then moved to Detroit Country Day for the sixth and seventh grades, attended eighth grade at Cranbrook Middle School, and spent his high school years at Cranbrook Kingswood Upper School in Bloomfield Hills.
“The teachers (at Cranbrook) were terrific and the school was great,” Victor says, “but I can’t help but think the most important influences and impact came from the friends (I made) and the other students. I’m in touch with several of them to this day; two were ushers in my wedding, and I was an usher in theirs. You know, there were just some wonderful people there.”
When it came time to move on to college, Victor looked beyond his home state. “I’d been lucky enough to travel a bit and gotten out of Detroit as I was growing up,” he says. “My parents never wanted me to feel limited in any way, including geographically, so I was very much encouraged to look at any and all schools.”
He chose Princeton University, where he earned a degree in economics and public policy, followed by a master’s degree in jurisprudence from the University of Oxford in England, before coming back to the U.S. and obtaining a law degree and an MBA at Stanford University.
“There wasn’t just one thing I was passionate about doing,” Victor says. “I thought I might gravitate more toward business. Growing up, I’d heard about the degree to which business was increasingly involved with the law, lawyers, regulations, contracts, et cetera, and (I thought) that having a legal education would be good grounding, generally.”
Victor’s postgraduate focus on the study of law and business prepared him for a career in virtually any field, but he held off on choosing one. “After graduate school at Stanford, I moved to Los Angeles and had a number of jobs in different sectors. I worked for a year for a real estate investor, then worked at Kaufman & Broad from 1986 to 1990, going to the school of Eli.”
Eli is Eli Broad, another Detroit native who is the only person to have built two Fortune 500 companies from the ground up, in two completely different industries and two different cities — Kaufman and Broad Home Corp. (now KB Homes), and SunAmerica.
After leaving KB Homes, Victor spent the next 15 years in a variety of roles, including consulting for a financial advisory firm and working with his father in the development of a real estate opportunity in Palm Springs. He also helped his father run and, later, sell another family business in Grand Rapids.
From there, Victor became vice president of finance for The Irvine Co., a real estate development company that had a Detroit connection: In 1977, it was acquired by a consortium of individuals led by A. Alfred Taubman (founder of Taubman Centers Inc. in Bloomfield Hills), Detroit industrialist Max Fisher, and Henry Ford II, former chairman and CEO of Ford Motor Co. in Dearborn, as well as Milton Petrie and Allen & Co.
“I also ran a little internet company that ultimately didn’t go anywhere, called eBility,” he says. “We were trying to develop a portal website for people with disabilities. It was about doing well by doing good, and it was at the very beginning of the internet phase when everybody was starting companies around websites. I did that for a couple of years, and then it didn’t pan out.”
All of that was a prelude to Victor’s launch, in 2005, of Balmoral Funds. The enterprise, based in Los Angeles, manages three private equity funds with more than $350 million in assets. A nimble management team that includes Victor’s middle brother, Skip, oversees the funds. From the outset, Victor’s approach to building his company’s assets was strategic and deliberate.
“I’m not sure I can say that we’re completely unique or different,” he says. “We thought we could maybe raise some money and invest in sort of deep-value opportunities, primarily in and around restructurings — corporate bankruptcies, that sort of thing. So I went out and raised a small amount of money, and the idea was to find special situations where we could be convinced we were bringing something to the table.
“Our first fund was tiny; it was in the $35 million range, and we only invested some $20-odd million over a five-year period. We made two investments before the financial crash and two afterward. Those worked out quite well.”
The second fund, launched in 2012, was larger, with $110 million in commitments. “Just last October we raised our third fund,” Victor says. “It’s a little over $230 million, so we’re still small and nichey by private equity standards, but we’re very hands-on, very selective.
“Why are we so lucky to have this great opportunity, and why are we willing to pay more than anybody else? Because, fundamentally, buying things isn’t hard; all you have to do is pay more than anybody. That’s not the hard part. What is hard is making a good investment that will return multiples over a reasonable period of time. Success means finding the right situation, together with partnering with the right senior management team.
“We take our time, but it’s always about making sure management has an ownership stake alongside us,” he says. “Plus, you need a combination of great competence, integrity, and alignment of interests. We never lose sight that these are living, breathing organizations with employees whose futures are at risk. It’s also about our investors and making good returns for them. Many are university endowments and nonprofit foundations.”
Balmoral typically invests in companies that have revenues between $30 million and $300 million, and require equity investments between $5 million and $40 million. One of the companies Balmoral has invested in is Vesta Modular in Birmingham, a leader in modular building sales and leasing that offers turnkey permanent and temporary modular construction solutions for sale or lease across North America.
“They own and rent a fleet of modular buildings,” Victor says, “and they serve as a general contractor for those interested in building and owning real estate projects built of modular construction. We got to know the senior management team and admired their integrity and competence.”
The company being based in his hometown is a bonus for the 61-year-old Victor.
“Geography typically isn’t an important criterion for us in making an investment,” he says, “but I’m delighted that Vesta is located in Birmingham, and I now have a good reason to return there on a regular basis for board meetings. Having been born and raised there, I’m thrilled to see the renaissance of Detroit. I also have friends from elementary and high school who live in Detroit, and I have cousins who still live there.”
There’s another allure for Victor in his hometown: His first cousin owns and operates Stage Delicatessen on Orchard Lake Road in West Bloomfield Township; the deli was started by Victor’s aunt and uncle in 1962. He usually stops by whenever he visits, sometimes ordering No. 38 on the menu — corned beef, pastrami, coleslaw, Swiss cheese, and Russian dressing on an onion roll, also known as the Victor Special.
“The Victor Special was something my father ordered regularly,” Victor says, “and so it was named after him. It reminds me of my father and a very happy childhood growing up in Detroit.”
The food and fond memories aren’t all Victor experiences when he’s at the Stage. He also gets a healthy side dish of perspective. “I’m very happy with what we’ve done at Balmoral,” he says, “but I would never think I’ve become a big shot or made it to the big time. So, when I go there, I get a sense of my roots and my connection to my hometown.”