mack

AREA, founded in 1993, has invested around $14 billion in over 600 transactions worldwide, including the Time Warner Center and the Apthorp condominium in New York.

Interview conducted and condensed by

VIVIAN MARINO

Q. How much of your portfolio is in the New York region?

A. I would say probably about 25 percent of what we do is in the New York area.

Q. Is most of your focus these days in the multifamily sector?

A. We are opportunistic in how we view the world, and so we see the risk-adjusted returns favoring the residential sector. Over the last three years we’ve been one of the most active buyers of multifamily. We bought nearly 25,000 units across the country.

Q. You’ve also gained control of properties through debt purchases, like the Apthorp condominium on the Upper West Side. What’s happening there in terms of improvements to the building?

A. Most of the value-add that needed to occur to the common areas has already been done. But upgrading the finishes and combining units is something that we continue to do.

Some like to finish the units themselves, so we are making a unit-by-unit decision. The biggest value-add that we’re bringing to that property is stable ownership. It’s making people feel comfortable that the asset is properly capitalized. They don’t have to worry about another financial crisis.

We have everything from four-bedrooms to studios.

Q. How else are you adding value to your acquired properties?

A. Value-add for us is a style of investing. We are buying cash-flowing assets that have some need of improvement. In multifamily space, for example, we’re looking for properties that have been overleveraged and therefore financially starved of investment. So there’s deferred maintenance. So we’re fixing roofs and clubhouses and things like that. We also look at investing in the units, where we think that upgrading the units we can get higher rents.

Q. What about investing in condos?

A. We think that the multifamily sector is very, very resilient and has been driven by things other than economic growth, really demographic forces. But I also think there’s an element of people wanting to rent, believing that home prices are only going to go up. So you have this large change in attitude about homeownership and demographic forces.

A shock in the condo market could come from a disruption in the economy. So we are concerned about taking too much risk on the condo side. We are approaching it right now with preferred equity and mezzanine as a way to enter the business, but we’re not ready to take on more risk from a common equity perspective.

Q. Who are your main investors?

A. They are the largest public pension funds in the U.S. and some of the largest sovereign wealth funds in the world. We have them from the Middle East as well as other places that seem to be exporters of capital these days.

Q. What’s the minimum investment in your funds?

A. The minimum is usually $5 million. It’s primarily institutions, but we do have high-net-worth investors who can make that investment and those who have been investing with us for very long periods of time who we can be somewhat more flexible with.

Q. What kind of rates of return are you looking to get on your funds?

A. We target different rates of return depending on the risk we’re taking. For our mezzanine funds we are looking for 12 to 15 percent; for our value-add fund we’re probably looking for 13 to 16 percent; and for our opportunistic funds we’re looking 16 to 20 percent.

Q. Your father, William Mack, is a prominent real estate investor, and also the chairman of the board of Mack-Cali Realty, one of the nation’s largest publicly traded real estate investment trusts. Was he also your mentor?

A. My father definitely has been a mentor — whether on purpose or by osmosis. Growing up, going out to the construction sites when you’re a kid definitely has an impact on you. Even if you want to get away from real estate it’s kind of hard. It was kind of in my blood.

My father is kind of the senior statesman and the chief critic. It’s been fantastic to have him there to serve both of those roles. I think what I learned most from my dad was probably lessons on humility and how to treat people in the world, and that your word is your bond.

Article source: http://www.nytimes.com/2012/11/28/realestate/commercial/the-30-minute-interview-richard-j-mack.html?partner=rss&emc=rss

The Agenda

How small-business issues are shaping politics and policy.

In September, The Agenda reported about the Obama administration’s QuickPay program, an effort to reduce payment time for small-business invoices from 30 to 15 days. Earlier this month, a reader, Paul Kakert of Davenport, Ia., wrote to express his skepticism.”Sure, it sounds good. Paid within 15 days,” he commented. “But within 15 days of when?” He went on:

“It’s not 15 days from the date of invoice, which in the commercial business industry would be the norm. It’s 15 days from whenever the government gets around to approving the invoice. What the president fails to take into consideration is that the layers of government inadequacy can take weeks to approve an invoice submitted by a small business.”

I put Mr. Kakert’s question — “within 15 days of when?” — to Moira Mack, a spokeswoman for the White House Office of Management and Budget, which issued the new guidelines. It turns out Mr. Kakert is right — it’s not 15 days from the date of invoice. Or rather, not just from the date of invoice. Ms. Mack quoted from the memo, which said, “To the extent practicable, federal agencies shall establish a goal of paying small-business contractors within 15 days of receiving proper documentation, including an invoice for the amount due and confirmation that the goods or services have been received and accepted by the federal government.” To some owners, that may sound like 15 days from whenever the government gets around to approving the invoice.

In the commercial world, standard payment terms have typically been 30 days from the date of invoice, but corporations have been stretching that to 60 days or longer, according to Jeffrey Leonard, a venture investor who wrote about the new normal for The Washington Monthly.

That point was emphasized by Joseph Jordan, the Small Business Administration’s associate administrator for government contracting and business development. “When I talk to small businesses about getting paid by the government versus getting paid by the commercial sector, in terms of turnaround, they’ll take being paid by the government seven days a week and twice on Sundays,” said Mr. Jordan, who acknowledged that there could be approval delays. “When you’re talking about five to eight million contract actions a year, are there bound to be issues with some individual contracts? Absolutely,” he said. “But by and large, the government pays its bills very promptly.”

The White House, he continued, “is definitely looking at the total through-put time. There’s a clear place where we had control — cutting the 30 days in half. The president took all these factors into consideration and said let’s do what we can and cut payment time from 30 to 15 days.

“Let’s not make the perfect the enemy of the good.”

Article source: http://feeds.nytimes.com/click.phdo?i=4b6787ea12b74d8809b638fe8d3c53fd

The 30-Minute Interview: The 30-Minute Interview: Richard J. Mack

You’re the Boss Blog: For Contractors, How Quick Is Obama’s QuickPay?

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