Q&A: Buchanan Street’s Brunswick Discusses Move to Principal Products
- Oct 20, 2008
In early October, Buchanan Street Partners announced plans to accelerate its principal platform. Buchanan Street’s president & CEO, Robert Brunswick (pictured), recently discussed this new initiative, and about the state of the commercial real estate market and capital markets overall.CPN: Please discuss the main reasons you are going to be more focused on principal investments?Brunswick: When we started the company, and we are now in the 10th year, our goal was to be a pure real estate investment management firm. It has taken some stops to get there. The market excelled our business plan, and a good part of our business was to act as an intermediary. We think, in this market, that this is an excellent time to move more into investment management. And with the sale of half of our company to TCW, we want to develop more principal products. It’s an evolution, and it’s recharged me, as we fulfill our next goal to become primarily a principal investment company. CPN: What forms will these investments take?Brunswick: We will continue to provide JV equity to the developer and operator network, but add mezzanine debt, preferred equity and structured debt through our principal investment programs. In addition, we will be purchasing both performing and non-performing loans. In regards to the future, we are evaluating supplementing our value-add investment initiatives with a core-plus strategy, as those opportunities present themselves. CPN: Do you see investment opportunities in one property type over another?Brunswick: I think there are very good risk-reward opportunities. We are going to play at all levels of the capital stack. The most interesting yield opportunities can be found in the equity tranche of the capital stack, and that will be true now and a year from now. CPN: Investment in commercial real estate, of course, has slowed significantly. When do you see transaction volume regaining momentum?Brunswick: Real estate is still a hard asset. I am more bullish than most on how soon the market is going to come back. We’re starting to see people return to the market, on a small scale. They’re starting to underwrite again. We’re going to see capital flow to opportunities. If we had a billion dollars to invest, commercial real estate investment stacks up very well, on a risk-return basis, compared to other investments . The stock market rose 12 percent today [October 14], buyers bought when they saw prices that were attractive. Investment won’t happen that fast in commercial real estate, because this is an inefficient market. That is OK, because it creates opportunity.