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Connect, December 2010 - Kenneth Leventhal and Stan Ross: partners in real estate - EY - United States

Kenneth Leventhal and Stan Ross15th anniversary of the
KL/EY real estate merger

Howard Roth

Following in their footsteps

Howard Roth, EY Global/Americas Real Estate Leader

As a Kenneth Leventhal & Company partner at the time of the merger with EY, it gives me great pride to be able to carry on some of the traditions and principles that these two iconic individuals instilled in a generation of young real estate professionals.

It is truly remarkable that now, more than 15 years later, the Leventhal name still resonates strongly in the marketplace, and that so many Leventhal firm alumni find themselves in leadership positions throughout the real estate industry.

With their focus on deep industry knowledge, education and technical depth, Ken and Stan set the highest standard in the marketplace for excellence as trusted business advisors to clients — both during good times and bad.

Ken and Stan both referred to the value of expanded global capabilities as part of their rationale for merging with EY. Though they are men of truly great insight and wisdom, I don’t think even they could really appreciate at the time just how visionary and critically important this world view was to become to our firm’s future in the real estate industry.

Today, as much as anything, it is our global real estate network — first actively pursued by my predecessor, Dale Reiss (also a former Kenneth Leventhal partner), and then continued and further expanded by me — that truly differentiates EY in the global marketplace.

At the time of the merger, I may have been considered a “long-shot candidate” to lead the EY Real Estate practice 15 years hence. So I consider it a special privilege to have my comments included here next to Ken’s and Stan’s.

I hope they will be proud to hear that it is the things I learned from them that I continue to repeat over and over and that are very much embedded in the strategy for our practice: “follow the assets,” “use a multidisciplinary approach to client service” and “capitalize quickly on change.”

The lessons learned from Ken and Stan all those years ago continue to be the lynchpin for the great success of EY’s global Real Estate practice today.

Stan Ross (left)
and Ken Leventhal

This year marks the 15th anniversary of the merger of real estate accounting firm Kenneth Leventhal & Company with Ernst & Young. In celebration of this historic event, Connect recently talked with Kenneth Leventhal and Stan Ross — the two men who built Kenneth Leventhal & Company into the leading real estate accounting practice of its day. We discovered a unique relationship that has not only stood the test of time — over 50 years — but is built on remarkable trust and respect.

Some twosomes were just meant to be. There’s Barnum and Bailey, Siskel and Ebert, Ben and Jerry, George and Gracie, Lewis and Clark. And then there’s Kenneth Leventhal and Stan Ross.

The men first met in New York City in 1961 and have been working together ever since. Although they officially retired as Ernst & Young partners in 1999, Leventhal, who turns 90 this year, and Ross, who turns 75, still report to the Ernst & Young Century City office each day, where they continue to work, inspire and good-naturedly rib each other.

We asked them about the practice they founded, their merger with Ernst & Young, and what’s kept them together after all these years.

Connect: In 1995, you were running one of the largest, most successful real estate accounting practices in the world. Why did you decide to merge with Ernst & Young?

Leventhal: Well, for one thing, we felt it would give us a lock on the real estate industry.

Ross: At the time, Kenneth Leventhal was synonymous with real estate. We had the brand and identity in the marketplace. We were expanding rapidly, but in order to continue to do so, we recognized we also needed to expand our technical and global capabilities. Merging with Ernst & Young would give us the platform to accelerate our growth plan.

Connect: Why Ernst & Young and not some other firm?

Ross: Back then, it was the Big Eight, and we considered them all. But we felt the culture of Ernst & Young best matched that of Kenneth Leventhal. It was very entrepreneurial. It seemed like a good fit.

Leventhal: Ernst & Young already had a strong real estate practice that we could build off of and expand, so we thought we could integrate most smoothly with Ernst & Young. Also, we were good friends with Walter Beran (retired partner, deceased).

He was a big supporter of the University of Southern California School of Accounting, where I was also teaching. (Editor’s note: eventually, the USC School of Accounting would be named in honor of Kenneth Leventhal).

Connect: What was the biggest change following the merger?

Leventhal: At the time of the merger, Kenneth Leventhal & Company had about a dozen offices outside the US, but nothing like the global presence of Ernst & Young. So we immediately went from being a fairly large, somewhat international organization to a giant, very global firm.

Ross: For me, the biggest change was the access to the amazing array of technical specialists. No matter what the industry or issue, somebody would say, “We have an expert on that.” And, of course, we suddenly had the opportunity to connect with many more Fortune 500 accounts.

Connect: Looking back, was the merger the right thing to do?

Ross: After 15 years, Ernst & Young owns the real estate space. Whatever measure you use — whether it’s the number of public companies served, revenue percentage, industry capture rate — it’s been a tremendous success.

We’re also proud of some of the former Kenneth Leventhal people who’ve achieved high status in the firm, people like Howard Roth (current Global and Americas Real Estate Leader) and Joe Knott (Quality and Risk Management partner).

I think [Kenneth] Leventhal & Company would have been tremendously successful even if we hadn’t merged, but expanding the international side would have been much more costly and complicated than I think we could have imagined.

Leventhal: If we hadn’t merged, Sarbanes-Oxley would have forced us to change our entire model. The basic underpinning of [Kenneth] Leventhal & Company was the high integrity of our partners — the banks and creditors knew our findings would be the same no matter if we worked for them or the developers.

In celebration of this historic merger, we recently talked with Kenneth Leventhal and Stan Ross — the two men who built Kenneth Leventhal & Company into the leading real estate accounting practice of its day.

This allowed us to grow exponentially in the reorganization field. We practically authored the idea of consensual reorganization without the debilitation of bankruptcy. But that meant working with our clients to get financing, aiding purchases and other activities that are now prohibited under Sarbanes-Oxley.

Ross: By being part of Ernst & Young, which broke its clients down into Channel 1 (assurance/audit) and Channel 2 (non-assurance/audit), we were able to remain fully independent while still having access to many new clients through which we could grow our real estate practice.

Connect: How did you two meet?

Leventhal: I did two years with Carl Oppenheimer while finishing up my accounting degree at UCLA. Then, I opened the Kenneth Leventhal practice in a spare bedroom in my two-bedroom home.

It was 1949, and this was Southern California and real estate was “the thing.” The practice started growing. In 1961, when the firm had grown to 6 partners and approximately 115 professional staff, I made a trip to New York City to take care of some business and do a little recruiting. I put a small want-ad in the paper and that’s how I met Stan.

Ross: Yeah, and here’s the deal Ken offered me: I got a one-way ticket to California, US$100 in moving expenses, and if I got fired, I had to repay him.

Leventhal: That was a lot of money back then!

Ross: He was so convincing, but he had a vision that set the tone for the whole company. He’d tell us, “You just don’t become an accountant, but an expert in the business.”

When you really learn the business and can add real service to your clients, that’s when it becomes fun. We soon became known as the real estate technical experts.

Connect: And you’ve been together ever since?

Ross: Yes, and he’s been yelling at me for 50 years! I remember arriving in California and asking Ken where the other 300 accountants he said he employed were. He replied, “Oh, I didn’t say we had 300 accountants; I said we could build it to 300 accountants.”

Leventhal: And the first time we went to a client, on the way out I asked you, “I thought you said you knew real estate,” and you responded, “Oh, I didn’t say I knew real estate; I said I wanted to learn about real estate.”

Ross: So we sort of reconciled our differences and started building our firm.

Connect: You both technically retired in 1999 but still come to work every day. Why?

Leventhal: Well, at my age, a lot of my former clients have passed away. So I do a lot of estate work as the executor.

Ross: Personally, I like to work and enjoy the intellectual challenges. But don’t underestimate Ken. He still works out every day, he’s a Life Trustee at USC and he mentors and counsels many, many people. He’s on the phone all day — more than me. He still even does his own taxes!

Leventhal: It keeps me off the streets. And Stan keeps pretty busy, too. It wasn’t easy getting him to become a USC Trojan, but I convinced him to run the Lusk Center for Real Estate at USC, which is probably the leading real estate institute in the country right now.

Connect: Based on your 100+ years of combined experience, what trends or issues do you see in the business?

Ross: I think the key to growth in accounting is continued industry specialization. The Ernst & Young Real Estate practice only proves that. I would focus on industry specialization even more now than we have in the past.

Leventhal: The thing that bothers me nowadays is reading about all these accounting problems and “irregularities.” I’m worried about the standards of our profession that would allow all these “irregularities” to occur.

I think we need to teach accounting students and younger staff a greater obligation to integrity. We need to raise our level of respect.

Connect: What is the definition of a “good day” for you?

Leventhal: When the doctor says I’m OK.

Ross: We keep a gurney in the hallway just in case.

Connect: When you first met in 1961, did you ever think you’d still be working together 50 years later?

Leventhal: When we filled out our partnership agreement, I don’t think we thought anyone would live that long.

Ross: You just didn’t think in terms of 50 years at that time. But I will say this: everything I am I owe to Ken.

Leventhal: …and everything I am I owe to my mother.

And with that, Kenneth Leventhal and Stan Ross share yet another laugh and then get right back to work.

EY Real Estate practice at a glance

Real estate comprises the second-largest market segment for EY globally. Our Global Real Estate Center gives us an international perspective on the industry and facilitates the collaboration that helps clients solve their business issues and achieve their potential.

A wide array of industry news and thought leadership, including our recent publication Infrastructure 2010, is available here.

December 2010

Howard Roth

Following in their footsteps

Howard Roth, EY Global/Americas Real Estate Leader, comments on the lasting traditions and principles of Leventhal and Ross. Read more.

F. Trammell Crow

F. Trammell Crow: EY alum and real estate pioneer

One of EY’s most distinguished alumni is the late F. Trammell Crow, founder of the Trammell Crow Company and a pioneer in the area of speculative real estate development.

Today, the Trammell Crow Company remains one of the largest real estate and asset management companies in the world, having developed or acquired more than 500 million square feet of space representing more than US$50 billion in value.

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