Institutional Investor's Alpha Magazine - December 2007/January 2008 - (Page 34)

George Rizk panies that support them, like law and accounting ﬁrms, will reduce their space requirements. We’re seeing paralysis across the market — nobody wants to make a mistake. Lenders don’t want to write aggressive loans, and that affects sellers. So fewer assets are changing hands in the U.S. Our global mandate allows us to focus on international markets when domestic opportunities aren’t attractive. How do you identify global investment opportunities? How are most real estate opportunity funds structured? Most real estate ﬁrms are product-focused and do only equity or debt ﬁnancing. Many have a speciﬁc geographic or asset-class focus like ofﬁce buildings, hotels or retail centers. How important is the investment time horizon? We have people around the world who trafﬁc in deal ﬂow with some element of real estate. Relationships are also a valuable source of deal ﬂow, and our partners and borrowers provide referrals. Investment banks, brokers and other advisers are also starting to understand that we are in the real estate business. What is your basic approach to real estate investing? Our structure allows us to do both short-term and longterm deals, giving us a competitive advantage. Traditional ﬁrms, with closed-end structures, need to generate liquidity from investments within three to seven years. Can you give an example of a short-term deal? A developer approached us with a request for growth capital to develop a Hispanic-theme retail concept. Within a week we tailored a mezzanine loan that allowed for completion of a project in Charlotte, North Carolina, and an equity partnership that permits national expansion of the concept. What about a long-term investment? “Not to have real estate exposure doesn’t make any sense because it’s one of the largest asset classes out there.” We’re strictly opportunistic, value investors. Although our investment committee understands current conditions in the equity and debt markets and how it affects our business on a daily basis, we don’t have broad macro themes that drive our investment appetite. How do you source new deals? Because of our global reach, we see interesting opportunities in virtually every market and deal f low from each of our 11 ofﬁces. Whether it is the chance to acquire an ofﬁce building in Kansas City or potential real estate deals referred weekly by the private equity team in — GEORGE RIZK India, our analytic real estate skills and underwriting expertise allow us to quickly determine which deals merit closer scrutiny. We have top-down expertise, and my team also has bottom-up valuation expertise. How is your investment approach different from that of traditional real estate ﬁrms? At the end of 2006, we partnered with SunCal Cos. to acquire real estate developer Westland Development Co., a public company that owns more than 55,000 acres of land in and around Albuquerque, New Mexico. With our partners we have created a long-term development plan we believe will reshape Albuquerque/Bernalillo County, and perhaps the entire Southwest. That deal will likely have a 15-year holding period — something more-traditional real estate funds couldn’t participate in because their investment horizons tend to be in the ﬁve-to-seven-year range. How has the real estate industry changed recently? There has been a proliferation of different types of platforms entering into real estate, from private equity shops, to straight hedge funds, to commercial banks and corporate America. Investment teams tend to be specialized, and there may be multiple teams within each entity. This organizational complexity and specialization can create frustrations for partners looking for quick, creative solutions. Describe your recent foray into Chinese real estate. Our large, ﬂexible capital approach gives us the ability to invest across the entire capital structure of any transaction — meaning there are instances where the equity in a transaction may not be interesting to us, but where a debt position might be because of the risk-adjusted yields on the deal or how the equity and debt are priced. We believe having a global platform is also an advantage. Internal expertise across multiple industries and geographies can make it easier for us to analyze deals and help us to respond faster to our partners. It’s hard to overstate the beneﬁts of being global. Having a global investment perspective in today’s environment, given the challenges domestically, is critical to our plan to build out a real estate presence. We’ve done two deals in mainland China. We bought an interest in a Chinese development ﬁrm headquartered in Beijing — a state-owned ﬁ rm that was being divested. Two investment banks and a Japanese partner were buying it, but one of the banks dropped out near the deal’s closing. We were invited in by the remaining bank and had to commit within three-and-a-half weeks. We also made an investment in a property ﬁrm that owns a series of properties, a company we believe will ultimately be taken public. We provided bridge ﬁ nancing to aid the company’s growth before it goes public. Where are you looking next for deal ﬂow? We’re focusing on Asia, among other regions. India and Central Asia have been challenging, but we think our deal ﬂow there rivals any other ﬁrm’s. More broadly, we’re looking in Brazil and Argentina, the Caribbean and the Middle East. 34 • INSTITUTIONAL INVESTOR’S ALPHA • DECEMBER 2007/JANUARY 2008

Table of Contents Feed for the Digital Edition of Institutional Investor's Alpha Magazine - December 2007/January 2008

Institutional Investor's Alpha Magazine - December 2007/January 2008 Contents Letter from the Editor Longs & Shorts Pension Corner: Liberal Returns The Good Guy: Inner-city MVP Cover Story: Marathon Men Interview: Rizk Management Profile: Living on Hostile Ground Profile: Buy and Hold In Theory: The Fallacy of Portable Alpha Strategies: Changing Course Alpha Bytes: Behind the Scenes Unhedged: Commentary: An Activist Alternative

Institutional Investor's Alpha Magazine - December 2007/January 2008

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