Greybrook Realty Partners
Since partners Peter Politis and Sasha Cucuz came together over a decade ago, Greybrook Realty Partners has established itself as one of the leading real estate private equity firms in Canada. The Toronto-based company has grown to become one of the industry’s preeminent asset managers focused on creating value for its investors by sourcing high quality, development-based opportunities in partnership with some of North America’s largest and most successful real estate developers. Greybrook has invested over $700 million in equity across more than 50 development projects, which collectively have an estimated completion value of over $6 billion in residential and commercial real estate across Canada and the U.S. The firm’s current portfolio includes a diversified mix of low-rise and high-rise residential, purpose-built rental, as well as commercial development.
Greybrook Realty Partners’ mandate is to deliver consistent returns for its investors. This is achieved by following a disciplined investment strategy that is focused on identifying opportunities with experienced real estate developers in markets that exhibit strong economic fundamentals, while maintaining an investment structure that protects its investors and aligns stakeholder interests.
The Canadian Business Journal recently spoke with two of Greybrook’s partners, Peter Politis, CEO of Greybrook Realty Partners, and Sasha Cucuz, CEO of Greybrook Securities Inc., about what it takes to make successful investments in real estate development.
Exceptional partners, exceptional returns
“Greybrook has delivered strong returns for investors by following a disciplined investment philosophy and sticking to our investment criteria with no exceptions,” explains Politis. A major element of the firm’s success has been the strength and calibre of its developer partners. “Finding the right development partner is the most critical step in our process. We’re fortunate to have built strong relationships with some of the most well-established and successful players in Canada and the U.S. These firms have the breadth of experience and organizational strength required to navigate development risk and successfully execute.”
Greybrook has partnered with over a dozen real estate developers who operate in Southern Ontario and South Florida. “Without these high quality partnerships, producing great risk-adjusted returns for our investors would simply not be possible.” Cucuz added, “Our investment philosophy is complex yet simple. Real estate development is multi-faceted, with many moving parts. Our view has always been that world-class execution is the most critical ingredient to success. Without this, you could have the best site situated in the best market in the world and still find yourself in trouble. Peter and I have seen this throughout our careers, which is why our team applies such a laser sharp focus on developer partner selection. To distill things simply, our view is that if we’ve purchased a good property, with a great partner, and we’ve put in place a structure that aligns our investors’ interests with those of all other stakeholders in the project, then we’ve set ourselves up for success.”
An equity investment
Investing with Greybrook Realty Partners is not the only way an individual investor can access Canada’s growing real estate market. In fact, there are several options investors can consider when looking for exposure to real estate development. Politis points out that there are critical differences between what Greybrook does and what many others offer investors. “While our structure itself isn’t unique, it’s what we call “institutional grade”, meaning that more often than not those who play the development game in the manner that we do are pension funds, insurance companies or other institutional money managers. It’s about access,” says Politis. “We’ve always been about bringing institutional grade investment opportunities to individual investors.” Cucuz adds, “Unlike some others out there who participate in development financing through a variety of debt structures or mortgages, we invest pure equity. We feel that doing so protects our interests, aligns the interests of all stakeholders and gives us the highest degree of control in execution. Development is so complex that we prefer being in a position of control over the position of a lender.”
Cucuz believes the risk/reward balance of the firm’s investment structure is much more favourable than some debt based investments, but he points out that being an equity partner also comes with a great degree of responsibility. Greybrook Realty Partners prides itself on being a hands-on asset manager and not a firm that simply raises capital for a development and moves on to the next deal. The firm stays actively involved in every aspect of the ongoing project and participates in critical decision making throughout the development to ensure investor return potential is maximized at the lowest acceptable level of risk.
Selecting the best projects
Greybrook evaluates several dozen projects each year to identify ones that meet or exceed its investment parameters. Projects must fit its specific investment criteria, which requires a thorough assessment of a project’s feasibility, expected return and an analysis of the potential downside risk. Greybrook has invested in several notable projects including a partnership with leading North American developer Property Markets Group (PMG) that will see the development of an ultra-luxury residential development at 300 Biscayne Boulevard in downtown Miami. When completed, the development will be the largest residential tower in Miami. Greybrook has also invested $41.4 million of equity in a partnership with Empire Communities to jointly acquire and develop a landmark property located in Toronto at 140 Yorkville Avenue, at the corner of Avenue Road and Yorkville Avenue, in the heart of Yorkville, Toronto’s most exclusive upscale shopping and residential neighbourhood.
A defensive investment strategy
Cucuz and Politis both believe that Greybrook’s investment strategy is defensive. They see their investors as being in a favourable and resilient position should a downturn occur in the market.
“We see ourselves as land owners first and manufacturers next. It sounds funny when you say it within the context of real estate investment, but because we’re equity and by way of our structure, we are ultimately owners of the subject property with the developer,” Cucuz explains. “In a way, land is our raw material and if the market is right, we’ll manufacture a product for a consumer to live in and produce a solid return for our investors. If on the other hand there’s a market correction, because we don’t break ground until we’ve sold the bulk of our inventory, our fallback position as owners is that we have the ability to sit tight and wait.”
Politis adds: “The only thing you can do before making any type of investment is to understand the various risks and to take the time, through careful underwriting to mitigate the risk wherever possible. At Greybrook, we mitigate as much of our development risk as we can through our structure, choice of locations and the strength of our development partners. For us, having staying power is the key to managing risk in development. The fact is, you can only have staying power if you’ve been responsible with your use of leverage when acquiring your land. Using responsible leverage, if any, is fundamental to our underwriting model.”
Outlook for the year
“2016 will be an exciting year for Greybrook as we focus on strong execution and work diligently to bring new investment opportunities in various real estate development asset classes to our investors,” says Politis. In the first four months of the year, Greybrook Realty Partners announced the successful close of four transactions representing over $70 million of invested equity in low-rise land development opportunities. “We have a strong pipeline of opportunities that we are evaluating and that are in line with our investment thesis. We are looking forward to making these new opportunities available to accredited and eligible investors,” noted Cucuz.