most of it–it had been renamed MacFarlane Partners–to GE Capital Services, which changed the name of the firm again to GE Capital Investment Advisors. The deal did not include MacFarlane’s urban business.
After a three-year period during which MacFarlane worked for GE Capital as part of the terms of the deal, he revisited his fledgling urban business. GE hadn’t acquired this when it bought the original MacFarlane Partners because there weren’t any assets there to speak of. It had been started in response to the 1992 riots in Los Angeles, when CalPERS asked all its real estate investment managers to figure out a way to invest profitably in the state’s inner cities. MacFarlane Partners was the only one that responded.
Teaming up with Johnson Development, MacFarlane presented their proposal to CalPERS, which invested $50 million in the team’s strategic vision. Johnson/MacFarlane Partners found that these neighborhoods were densely populated but had fewer stores. That meant the community had greater purchasing power than expected–something other investors had overlooked. That deal set the stage for others like it, and MacFarlane has never looked back.
As MacFarlane Partners continued to post gains, the funds attracted capital and what was once meant to remain a small boutique firm became an industry powerhouse–all within the urban space. The company’s largest increase in value to date is the 49.5% of the Time Warner Center retail space and the property’s parking structure from Apollo Real Estate Advisors and the Related Cos. in a deal valued well in excess of $500 million. MacFarlane Partners also acquired a $359 million participating interest in the New York City project’s $1.22 billion GMAC commercial mortgage construction loan. The investment agreement includes The Shops at Columbus Circle, encompassing 338,500 square feet of shops, restaurants, and entertainment venues, and a tri-level underground garage that can accommodate 504 cars and offers 24-hour valet parking.
Though market conditions remain unstable, the urban niche is here to stay. “Of course the credit markets are inhibiting deal making,†says Coda Investment’s Mashore, “but the urban space will continue to be highly prized among many different types of investors, particularly where it’s well-located.†And where there are deals to be made, MacFarlane will be there.
This story originally appeared in the January 2009 issue of Black Enterprise magazine.