Andrew Farkas doesn't have a crystal ball. Yet the real estate magnate has uncanny timing when it comes to commercial real estate investment decisions.
Over his career of more than 25 years, the Harvard grad has founded not one, but two sizable companies. In 1990, he launched Insignia Financial Group, a top owner and operator of multifamily properties. Farkas sold Insignia's apartment portfolio to AIMCO in 1998, and the global property services group merged with CB Richard Ellis in 2003.
His latest venture, Island Capital Group LLC, has emerged as a leading international real estate merchant bank. Not one to let the grass grow, Farkas actually founded Island Capital on the same day Insignia's merger with CB Richard Ellis was finalized. Island Capital is engaged in a broad range of real estate related activities. Despite the recession, the firm surged from $3.5 billion in assets under management in 2007 to its current $130 billion.
A pragmatic outlook guides the founder's success. “Whenever you do ait's important that everybody in the transaction makes money,” says Farkas, chairman and CEO of Island Capital. “In a cycle where you have made a very significant profit, it might be time to pocket that profit.” That's what Island Capital did in 2007 and 2008 when it sold portions of its portfolio, including marinas and trophies such as 230 Park Avenue in New York, a 34-story skyscraper.
The investor entered the recession with a sizable war chest and redeployed that capital. It acquired the institutional real estate debt fund management and commercial mortgage loan servicing business of Centerline Holding Co. last March. The new entity, C-III Capital Partners, is one of the largestspecial servicers in the U.S.
Island Capital's investments include property acquisitions, strategic investment funds, and those such as C-III, that create new business platforms. Typically, Farkas seeks returns greater than 20% on a leveraged basis. “To the extent that there is deterioration in the types of investments that we can make, or in the returns that are appropriate for the risk profile, we will throttle back. Until that time, we are very much full speed ahead.”