It’s the end of an era – and the beginning of another – for Anthony Westreich. For 12 years, he has run Monday Properties, the owner, operator and developer of more than six million square feet of Class A office space in the New York and Washington DC metropolitan areas, including the famed Helmsley Building at 230 Park Avenue in Manhattan, which also is home to the company’s headquarters.
With Monday Properties, investments were executed through JVs with partners such as Goldman Sachs, Invesco Real Estate and Rockpoint Group, with Westreich funding his firm’s 5 percent to 25 percent stake in the properties with his family’s money. It is a business model, however, that he no longer plans to continue. Instead, he is seeking to make all future deals in real estate through a new entity, Monday Capital Partners.
“The thesis is that we’re going to be more of an investment fund manager,” said Westreich in an interview with PERE. “We’re going to be more of a manager of institutional capital, either through a fund structure or one-off ventures.”
Westreich added: “My family’s pockets are only so deep, and I can only scale the company to a certain size. I think of this as an opportunity to grow the company to a much larger size. It’s about scale and opportunities of scale.” Going forward, he said he will continue to invest his family’s money through Monday Capital’s GP co-investment.
Monday Properties has had its share of missteps involving properties that were bought at the height of the market. The firm acquired 386 Park Avenue South in New York in 2005, but Savanna reportedly took a controlling interest in the property through a distressed note purchase for approximately $43 million in 2010 and the asset subsequently was sold in 2012. Meanwhile, 230 Park Avenue, purchased in 2007 with Goldman Sachs’ Whitehall Street real estate funds, was another troubled situation that required Monday Properties to bring in equity partner Invesco to help recapitalize the asset.
Of the 23 real estate assets that Monday Properties acquired since 2002, 14 properties – including a 10-building portfolio in Rosslyn, Virginia – currently remain in the firm’s portfolio. Westreich expects those assets to be sold once the business plans for those properties, which include leasing and redevelopment, are completed. “There will come a point in time over the next three to 10 years where anything that was owned that was Monday Properties will have been sold,” he said.
Westreich formed Monday Capital during the first quarter of 2013, teaming up with debt veteran Ethan Penner
, who most recently was the president and founder of CBRE Capital Partners, the property debt platform of CBRE Global Investors. “I had been thinking of ways to try and grow my platform,” Westreich said. “And in today’s world, which is so wildly opaque, it’s hard to see where the business opportunities are.”
For his part, Penner had been pursuing various business ventures since leaving CBRE in 2012 but was seeking to partner with an institutional platform. “The marriage was an obvious one,” added Westreich.
Over the next several months, the two brought on two other managing partners: chief financial officer Dang Phan, who has held top financial or operating posts at the private equity real estate fund businesses of Goldman Sachs, Donaldson, Lufkin & Jenrette, Soros Fund Management and Grove International Partners; and chairman Eric Gleacher, a former mergers and acquisitions banker at Morgan Stanley and Lehman Brothers, who represented the Lehman Estate in the $16.5 billion sale of its Archstone apartment business to Equity Residential and Avalon Bay earlier this year.
Given the current misalignment between value and pricing for Class A office properties, Monday Capital will not pursue the same investment focus as Monday Properties. Instead, it will target four very broad investment categories. Currently, the most advanced strategy for Monday Capital is single-family and multifamily residential. “Of all the income-producing real estate that one can invest in, multifamily properties are likelier to perform the best in an inflationary environment,” said Penner. While high-yield debt is not an area where the firm plans to invest in the next year or two, he anticipates that opportunities will arise as the largest vintages of commercial mortgage-backed securities come due over the next several years.
Monday Capital, which primarily will focus on the US, also will pursue “compelling” investments in certain subsets and submarkets of commercial real estate as well as special situations, which are a catch-all category, Westreich noted. “That’s really following trends, whether it’s a new industry or advancement in an industry that begets growth that begets real estate opportunities,” he said.
The partners are deliberately vague about the opportunities they are seeing in those investment areas. “A business that is erected to focus on a specific, narrowly-focused strategy because it was desired by investors is a loser strategy,” said Penner. “The reason why I say that is the world changes too fast, capital flows too quickly and today’s best idea is guaranteed to be a bad idea very quickly because capital will render it so.”
The structure through which Monday Capital raises capital largely will depend on the strategy. A CMBS-focused strategy, for example, would lend itself well to a traditional fund structure, while a large multifamily development deal would be better suited to a JV or club, Penner explained. He anticipates that Monday Capital will make its first investments – and raise third-party capital through a non-fund structure for those transactions – in the multifamily sector by the end of the year.