Barden Gale, vice chairman with Mack Real Estate Group (MREG), joined REIT.com for a video interview during REITWeek 2014: NAREIT’s Investor Forum, held in New York.
Gale joined MREG in October. The company is primarily involved in developing multifamily residential rental projects in urban markets. Gale noted that the firm is catering to renters in the millennial generation and “empty nesters” whose children have moved out of the home.
Gale was asked about the differences in how private equity firms might be approaching real estate investment versus stock exchange-listed REITs. He pointed out that his firm isn’t a private equity fund in the traditional sense so much as an “integrated owner-operator-developer.”
“We have all of those capabilities in house,” he said. “We are not a traditional fund group.”
Gale pointed out that the firm uses a combination of its own capital, joint ventures and outside funding from “family and friends.”
“It’s not what I would call a traditional institutional private equity effort in that regard,” Gale said.
However, he did acknowledge that MREG is “quite different” from a listed real estate company. MREG is heavily involved in development, according to Gale, and will be until it develops a “reasonably sized” portfolio.
Gale said one benefit of working in the private sphere is that MREG can afford to take a long-term view on its assets. That enables MREG to take measures such as holding land for extended periods of time before developing it and engaging in complicated transactions. Also, there’s no pressure on MREG to do “large and impactful” deals, Gale said.
“Every deal is an impactful one because we plan on holding it through multiple generations,” he said. “We can hold these assets in a tax-efficient manner for a long period of time.”
In terms of growing MREG’s portfolio, Gale said there are more attractive opportunities right now in development than in acquiring existing assets.
“Currently, there are still substantial spreads between development and the valuation of stabilized, standing assets, and we’re taking advantage of that,” he said. “As that narrows, clearly what we’ll do is slow down our development pace.”
Additionally, Gale indicated that the company is exploring “turnaround opportunities.”