Ronald Dickerman founded Madison International Realty in 1996 with a simple premise — to bring liquidity to the commercial real estate market.
Madison International provides equity capital in secondary transactions, supplying take-out capital for investors looking for an early exit strategy. Although the firm has committed over $1 billion in equity over its 15-year history, the credit crisis that stalled commercial real estate sales around the globe has propelled the company as investors sought out alternative sources of capital.
“We have never been busier,” says Dickerman, president of Madison International, which has offices in New York, Frankfurt and London. Over the past 18 months, the company has placed about $150 million in equity and expects to place another $300 million over the coming 12 months.
Madison International exclusively targets Class-A trophy properties. Its portfolio is a who's who list of top assets that includes the likes of 300 Park Avenue in New York, Devonshire House in London and One and Two Shell Plaza in Houston.
Madison International differentiates itself from other private equity firms by its willingness to assume minority ownership interests. Most private equity firms shy away from the risks associated with buying only a minority stake where they are subject to someone else's management, leasing and control rights.
The company is comfortable with that risk because it carefully vets deals, looking at factors such as the track record of the sponsor as well as analyzing lease and loan documents.
That strategy pays off in access to top tier properties and attractive returns. “We invest in core real estate that people think is very valuable and very frothy, but we enter through a different mechanism than most investors,” says Dickerman. The goal is to produce unlevered returns of 15% over the life of an investment.
In addition, the company invests in core real estate with the expectation of holding the investment for five to seven years. “One of the reasons that we have been welcomed into a lot of these ownership structures is because we are not sharks,” says Dickerman. “We are not buying people's debt and trying to foreclose on them.”