Former executives from The Townsend Group and Partners Group have revealed the focus of their new firm, Ten Capital Management. The Cleveland-based middle-market firm targets transactions that are too large or complex for small investors but fall “below the radar” of larger institutional investors, investing in the $5 million to $20 million range in secondary and tertiary cities throughout the US.
“We’re applying institutional discipline, judgment and control in the way that many of the larger groups do, but to a market that is underserved and less competitive,” Ben Adams, chief executive officer and founding partner of Ten Capital, told PERE. “We believe this will result in outsized returns and better downside protection.”
Initially, Ten Capital was founded in 2011 by Adams, a former fund of funds portfolio manager at The Townsend Group. Adams was joined by Carmela Guerrero of Townsend, now chief operating officer at Ten Capital, and Josh Brown of Lionstone Development, now Ten Capital’s head of finance and compliance. In the spring of 2013, Adams, Guerrero and Brown partnered with Jordan Caspari and David Smith
, who had departed in 2012 from senior roles at Partners Group and Helios AMC, respectively, in order to focus on transactions in the $1 million and $5 million range.
At Townsend, Adams witnessed firsthand how fund managers changed the way they raised capital following the financial crisis. “There was a flight to quality,” Adams said. “Bright, shiny blue-chip investors were investing in bright, shiny blue-chip managers, which invested in the bright, shiny blue-chip markets. Managers of that size don’t have the time to focus on a $10 million property; it would almost serve as a disservice to investors. From the top down, we looked at that opportunity and wanted to exploit it.”
Caspari explained that he became interested in pursuing a middle-market strategy when his experience running a $500 million fund with Partners forced him to overlook smaller deals. “We couldn’t do deals that were $15 million or less, but those were always the most interesting in my mind,” he said. “There’s more flexibility in structuring them and the returns are better.”
Over the past six months, Ten Capital has closed three transactions totaling $25 million in equity, including a retail property in Fresno, California and an office property in Oakbrook, Illinois. According to Adams, every deal the firm has conducted so far has become oversubscribed quickly by such investors as large registered investment advisors, accredited investors, family foundations and ultra-high-net-worth individuals. Pending deals include a 300,000-square-foot retail asset in Pittsburgh, which the firm hopes to close by Thanksgiving.
Going into 2014, Ten Capital expects a “very robust” pipeline across every asset class, with deal flow at a “breakneck pace. Our experience gives us an advantage,” said Adams. “When we approach an operator in the middle market, they know exactly what to expect.”