Mr. Dickerman, 47, is the founder and president of Madison International Realty, a real estate private equity firm, which through its investment funds holds ownership stakes in buildings around the world, including several in the New York area, among them the Chrysler East Building and 520 Madison Avenue. The company has also had investments in the Seagram Building over the years.
Q Tell me about your business.
A I think we do something very unusual in the world of commercial real estate and investing: we acquire ownership interests in Class A assets from existing investors looking for an early exit strategy. Our objective is not to seek control of the properties — it’s to provide liquidity, which means buy their interest. We’re not a loan-to-own shop.
Q What do you mean by an “early exit strategy”?
A A sale. Usually these are finite holding periods — it may be 5, 10, 15 years — for the overall venture. When you look at all the properties down Park Avenue, for example, even though the name plates in the lobby may say “RFR Realty” or “Brookfield” or “Tishman Speyer,” they don’t own 100 percent of the equity. They have partners. And partners change their minds, have different investment objectives, and they need liquidity at different points of time.
Q What is the liquidity you provide typically used for?
A To redeploy into other investment opportunities, to fund other liabilities within their portfolio.
Q What percentage of your portfolio is in the New York area?
A A large percent — I would say about 35 to 40 percent.
Q How large is your stake, on average?
A I would say 25 to 49 percent.
Q How do you and your investors profit from these arrangements?
A We would be entitled to our pro-rata share of the revenue and cash distributions. But the big payday is selling the buildings sometime in the future.
We have a contractual right to trigger a sale of the portfolio after seven or eight years of joint ownership, or they buy back our interest at appraised value.
Q What kinds of returns are your fund investors seeing?
A Our overall return profile is between 17 and 18 percent gross; that’s an annualized rate of return for realized investments.
Q Do you also help to add value to your holdings?
A We invest in core Class A assets where the building itself is relatively stable and the deal is not distressed. What’s distressed about the transaction is the fatigue of the underlying investor.
We do, however, make value-creation recommendations to our sponsor. For example, we have a building on the East Side in a joint venture with RFR Realty, called Eastbridge Landing. It’s a Class A doorman apartment building, and we made recommendations about new lobby amenities like a concierge service, and new paint and carpet in the elevators and the lobbies.
Q How is business lately?
A I’ve never been busier in terms of our transaction pipeline. Just in the last three to six months we’ve seen a significant increase in the amount of partial stakes that investors are bringing to the market.
Q You recently announced a deal to acquire a 49 percent interest in 15 retail and entertainment properties owned by Forest City Ratner.
A They came to us, I think, in September 2010 to fund their go-forward investments. You may know that the Atlantic Yards development is something like $4 billion.
These properties are as core as core can be. They’re 99 percent occupied; the average lease term is over eight years.
Q You recently raised your stake in Chrysler East. Why?
A To about 48 percent from about 35 percent. That’s a joint venture with Tishman Speyer.
We actually invested through a secondary acquisition from existing investors. That property is a joint venture between Tishman Speyer and a German syndication of individual investors. There was a significant number of German investors who wanted to sell their interest.
Q Can you talk about any other deals you might be working on?
A We have a lot of interesting deals going on between the U.S., London and Paris.
Q Your family once owned a business in the Boston area, rehabbing and selling buildings.
A That’s true! I was involved when I was younger in the maintenance crew, cleaning hallways and pools. It was a terrific foundation for the real estate business.
Q So are you still a Red Sox fan?
A I have become a Yankee fan.
It was hard to be a Red Sox fan when I was growing up.
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