two companies to pursue joint ventures and provides CharterMac the option to purchase a 49% minority stake in Capri’s remaining business between Aug. 1, 2005, and June 30, 2006.
“We had $5 billion worth of relationships through our mortgage banking portfolio, which helps distribute a fair amount of our mortgage-related products,” says Primo. “We now have a $10 billion organization that helps us source deals for our investors.” He also explains that because the market requires the advisory side of his firm to co-invest in the funds they offer to institutional investors, the amounts Capri must co-invest increase as their funds grow, leaving less capital for acquisitions and other deals. “To have a partner that we can share some of the [co-investment] burden with allows us to not constrain the growth we are experiencing.”
Since the CharterMac deal, the firm has redirected its focus to pension fund advisory services, the core business it started with 13 years ago. “We have been growing our institutional advisory business consistently now for the past five years, and we see ourselves building to $5 billion to $10 billion within the next five years,” Primo says.
To accelerate that growth, Primo used his strategic partnership with CharterMac to engineer the acquisition this August of Trilogy Capital Advisors L.L.C., an $80 million company that manages publicly traded real estate securities funds such as real estate investment trusts. A subsidiary of CharterMac provided a portion of the funding to acquire the firm, which will operate under the new name Capri Real Estate Securities L.L.C. While this first financed acquisition under the CharterMac agreement is relatively small, it fits neatly into Primo’s long-term plan to stay ahead of the competition by transitioning from an institutional investor advisory firm to one that also serves the retail investment market.
Trilogy gives Capri retail real estate securities investment funds that are traded in the public markets at a time when investor interest in real estate securities is burgeoning. Primo estimates the market for real estate securities at nearly $300 billion and growing, and he vows to capitalize on that growth.
“Virtually every major country in the world now is planning on or already has a REIT marketplace,” says CharterMac’s Boesky. “They have looked at, and are rapidly moving toward providing, commercial real estate with a way to be traded on an exchange. So this is a worldwide trend, and buying Trilogy really puts us in the forefront of that trend.”
Acquiring Trilogy also complements the product line Capri offers its clients. “Trilogy gives us the ability to play in private and public markets,” says Primo. “It allows us to expand the services we provide to our existing pension fund and other institutional investors but will also allow us to start working with smaller institutional investors that have investment mandates of only $5 million to $10 million.”
When Primo began flying from Chicago to New York to discuss how Capri could establish a joint venture for real estate deals with CharterMac, he didn’t envision selling any part of