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Ed Barner

Investor Profile

After Years in Prague, He Shifts to Las Vegas

By Kevin Brass
Editor

Ed Barner is not the type of property investor guided by spreadsheets, algorithms and data forecasts.

“It’s all gut with me,” Barner said. “I look at a few numbers, but for the most part I talk to people and get a gut reaction.”

For the 15 years Barner, a native of Los Angeles, focused his investments on high-end apartments in Prague, which he’s leased steadily to foreign corporations doing business in the Czech capital. Now he’s selling the last of his apartments in Prague and shifting his investments to suburban houses in Las Vegas.

In part, he’s motivated by a desire to stay closer to home. But he also sees a unique opportunity in the gambling center, which has been particularly hard hit by the downtown. The median price for an existing home dropped 38 percent in 2009 alone, according to research firm SalesTraq. From 2006 to 2010 the median price dropped from $280,000 to $120,000.

Barner has already bought four houses, typically paying between $140,000 and $170,000 for properties less than six years old with at least four bedrooms and 2 ¾ bathrooms. He’s renting them for between $1,300 and $1,600 a month—two of the houses are rented to people who lost the house in foreclosure.

“I’m not going too far up market,” Barner said. “I want to stay where people have money and working folk can afford to rent.”

Barner is best known as the founder of International Licensing and Management, a pioneering sports and entertainment management firm. His clients included some of the biggest name in professional golf, including Johnny Miller and Seve Ballesteros, as well as entertainers like Bob Hope. He also served in the Nixon White House and consulted with former presidents Gerald Ford, Ronald Reagan and George H.W. Bush.

Over the years he successfully built and bought apartments in Los Angeles, which, he noted, performed better than his ill-fated investment in Pan Am stock. In the ‘70s he bought a townhouse in London, getting “his feet wet” in the international business. He says he rented it out for 20 years and sold it for “10 times” what he paid.

After he lost a good chunk of his assets in a “terrible divorce,” Barner, looking for a new challenge, started exploring markets in eastern Europe, including Bulgaria and Romania. In 1994, he finally settled in Prague, where he saw opportunity--and it was close to Germany, where he had lived for three years in his 20s.

“I settled on Prague, not because I thought it was such a great investment, but it was a two hour drive from the German border,” he says.

But it was dicey market, as the country struggled with its violent past. The government passed a law recognizing the property rights of displaced families, giving them the opportunity to reclaim their homes. That meant, at any time, a previous owner could show up and kick out an owner.

To avoid potential conflicts, Barner bought attic space in buildings, which rarely faced any prior claims. He typically paid between $30,000 and $150,000 for a space. He then raised the roof, added an elevator to the outside of the building and converted the attic into high end apartments.

In a short period of time, he bought and renovated 22 apartments, focusing on the centrally located Vinohrady neighborhood in Prague 2.

Prague

“All of my units were in an area of 600 meters,” he said. “I didn't want to be running all over town.”

He invested in a furniture company, which he used to fix up the apartments to “Western standards,” with air conditioning, dishwashers, light fixtures and other amenities. Each was completely stocked with beddings, linens, silverware basic house wares to make them move-in ready.

Then he marketed the units to foreign corporations as housing for the flood of executives converging on the Czech capital. For 15 years he kept the apartments steadily rented to companies such as Federal Express, Accenture and HP. These days the rents typically range from €900 a month for a one bedroom to €4,000 a month for a three bedroom ($1,200 to $5,400).

As the Czech Republic grew closer to the European Union, there was a surge in apartment construction, resulting in a glut of what Barner calls “two-bedroom, two-bath cracker boxes.” Demand is still high for luxury units, but the market changed in recent years, including new tax laws.

“Any sane person wouldn’t buy now and they wouldn’t put it in their own name,” said Barner, who always used a corporation to manage his property.

In general, the Prague apartment market has not been hit as hard as other European capitals. According to Prague-based real estate company Lexxus, prices dropped about 10 percent in 2009, back to Jan. 2008 levels. But with little new construction planned, demand is out stripping supply, with investors accounting for about 25 percent of sales, Lexxus said.

Barner began selling the Prague apartments in 2006, generally getting between 90,000 and 120,000 CZK per square meter ($4,700 to $6,300 a square meter). He also benefitted from the exchange rate shifts over the years, which saw the Czech currency grow more valuable against the dollar.

Now he’s down to two apartments, which are priced at $580,000 and $975,000. (The listings can be found here.)

In the U.S., he looked in Phoenix, Miami and Palm Springs before targeting Las Vegas. He chose Sin City for the “ease of in management and ease of maintenance,” as well as the steady job market supporting the tourism industry.

“The reason that Vegas is a good property market is you have some very deep pocketed, savvy businessmen who have huge investments in hotels and casinos,” he said. “Vegas is not going to turn into a desert again.”

He plans to use cash to buy more houses, but he’s in no rush. Banks are still holding foreclosed properties off the market, he believes, hoping to bolster the market.

He’s also sticking to his specific plan. As a rule, he’s avoiding the luxury homes available in the area, despite steep discounts.

“Upscale stuff doesn’t rent very well,” he said.

He’s also staying away from the luxury apartments on the Strip.

“The Strip is still pretty pricey,” he said. “They haven’t had the wake up call completely yet.”

So far, he said, the plan has worked out and all his properties are leased. The market may be flooded with new rental units and rents may go down, but he believes his risk is small.

“I tell everybody I’m a fiscal genius,” he said with a laugh. “I’m just the luckiest guy in the world.”

After 16 years in Prague, Ed Barner is back living in Los Angeles. He can be reached at This e-mail address is being protected from spambots. You need JavaScript enabled to view it .

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