The harder Russell Appel works, the luckier he gets. At least, that's his theory. The founder of The Praedium Group, Appel in September closed the New York-based company's sixth real estate equity fund, Praedium 6. With $700 million in capital, the fund is slated to acquire more than $2 billion in assets through 2008. The first fund, launched in 1991, held $175 million in equity it leveraged to $280 million over a three-year period.

Over the past decade, little about Appel's strategy has changed: buy “broken” or underperforming assets in middle markets, fix them and sell at a profit — not a simple task in a market flooded with capital thirsting after deals. Talismans that bring the company “luck” include expertise and willingness to decipher complex deals, agility and the ability to close with cash on the barrel head.

NREI: Which property types are you most focused on and why?

Appel: Middle-market assets in the $10 million to $70 million range. We tend to look at assets that are not only generally underperforming, but that also are of a certain size. So, we're not competing with the large institutional capital. In retail, for example, we'd be more involved in urban retail, grocery-anchored retail or non-anchored retail, suburban or urban, independent stores. In multifamily, it tends to be smaller properties, and we've done a lot of urban infill properties. In industrial, we tend to do more value-added stuff.

NREI: Once you buy these underperforming and undervalued assets, do you reposition them or renovate?

Appel: All of the above. There's a series of strategies. Sometimes the assets require capital to fix deferred maintenance items. Sometimes it's a more focused leasing effort. Sometimes it's a renovation. A lot of urban infill we've been buying are properties that have not had enough capital put into them, and we come in and polish them and make them better real estate.

NREI: How long do you hold these assets?

Appel: It depends on the real estate, but on average between three to six years, a relatively short term. You go in and identify why you think the asset is underperforming, and you apply whatever is efficient — whether that's management expertise and focus.

NREI: Typically when you buy a property, do you pay all cash or put up financing?

Appel: Usually we commit without a financing contingency. We are a leverage buyer, whether we put the financing on at the time we purchase it or whether we put it on shortly thereafter. Sometimes we will close all cash, if it's a very quick closing, and sometimes we use that as a competitive advantage to buy a deal off-market or to preempt a marketing process.

NREI: What are the biggest challenges today in the investment arena for you?

Appel: Right now we're in an environment that is product rich and opportunity scarce, and I think our biggest challenge is working hard enough and being prudent and disciplined enough to take advantage of the right opportunities. When we find the opportunities, we work hard to complete the business plan because it's not just about buying something, it's about buying something and then executing a plan.