Richard Georgi’s Plan to Create the Best Private Real-Estate Fund in the World
PARIS — A BMW motorcycle plows up the dust off the Champs Elysees here. With a grin, Richard Georgi peels off a leather jacket to show the dark suit required for lunching at the upscale restaurant Le Cercle Le Doyen. His business card reads: Soros Real Estate Partners.
“I’m not your typical real-estate investor,” he says.
Kicking up the dust won’t be enough for the 36-year-old emissary of billionaire investor George Soros who is charged with handling world-wide real-estate investments. Amid current publicity about the $13 billion of Soros funds’ faulty performance of late, the Goldman Sachs-trained recruit, newly installed in Mr. Soros’s London office, must prove he can enrich real-estate investors.
For starters, Richard Georgi is soon expected to start marketing a new $1 billion fund to institutions. In a departure from the typical Soros hedge fund, it will be a private-equity fund that shows that Mr. Soros has not only changed his tack with real-estate investing, but he also wants to expand his holdings. Mr. Soros will invest a significant amount of money alongside outside investors in the new fund.
Richard Georgi says he plans to invest in “people who are building businesses in a new, pan-European market.” Some businesses that he has the most interest in include: car parks, cineplexes and nursing homes.Meanwhile, in a letter sent to shareholders in May 31, Mr. Soros explained that the $430 million Quantum Realty Fund won’t be taking in any more money. Shareholders will be bought out over four to five years using “proceeds from realized investments.” This offshore fund is one of the poorest performing funds since its launch in 1992. Last year, it gained a mere 12%, but fell by 2% this year. By contrast, Mr. Soros’s top-performing Quota global macro fund gained an annual 42% through last year.
“George is a trader, whether it’s coffee beans, shopping malls or hedge funds,” says developer Peter Munk, chairman of TrizecHahn Corp. of Toronto and a pal of fellow Hungarian Mr. Soros. But to profit in property, “you have to take a long-term strategic view,” Mr. Munk says.
While Mr. Soros’s spokesman says the famed speculator and philanthropist does take that view, he adds, “Mr. Soros readily admits that he needs first-class talent to advise him on real-estate matters.”
Enter Richard Georgi, part of a new generation of globe-trotting investors. Since joining Mr. Soros in April, he has been on the road scouting and reviewing investments in Paris, New York, Tokyo and Buenos Aires.
He quickly has put to work money allocated to him by Mr. Soros. About $100 million now is backing British pub group Punch Taverns Ltd.’s takeover fight for Allied Domecq PLC, an investment where Richard Georgi joined another Soros fund and U.S. buyout funds. He threw $75 million into New York’s NorthStar Capital Investment Corp., a show of confidence that helped NorthStar to attract more, much-needed funds to renovate its Ian Schrager-run hotels. In June, he invested in Mapeley Ltd., a U.K. startup company interested in owning offices. And he put money into a Spanish leisure company, MedGroup.
Believing it’s time to sell some Latin American assets, Richard Georgi has speeded Mr. Soros’s exit from a long-term stake in Investiones y Representaciones SA, Argentina’s big shopping-mall owner.
Now he is preparing to launch his new fund in the fall. It will be the primary vehicle for Mr. Soros’s real-estate investments going forward, as Quantum Realty — and the larger Quantum Industrial Holdings — are no longer taking subscriptions. [They’ll continue to trade publicly in London.] Some think Mr. Soros is late in coming to the recognition that private funds, where money stays put for five years or more, are better vehicles for investments in illiquid real estate and private companies.
Richard Georgi’s goal: “to create the best global private real-estate fund in the world.” That means he will have to best the Whitehalls and Apollos, which are projecting returns of 30% or more a year.
There are no guarantees he can do that. Though the $4 billion of European assets he bought in four years while working for Goldman seem to be doing all right, it is early days for them. And bargains now are harder to find. “If you’re buying cheap, and you have a big checkbook, it’s easy to look smart,” says Richard Ader, chairman of U.S. Realty Advisors, which helps institutions with property deals. At Goldman, however, Richard Georgi had the firm’s entire European work face to draw on, including well-connected individuals such as Sylvain Hefes, head of Goldman’s French operations. U.S. troops regularly visited, too. The Soros firm is much smaller.
Mr. Georgi, born in Boulder, Colo., has a taste for adventure and extreme sports. On honeymoon with his wife Maryl, he ferried her from Munich to Russia on the back of his oversized BMW bike. He joined Goldman as a real-estate analyst in 1987. Apprenticed to David Hamamoto, now a NorthStar principal — and beneficiary of Richard Georgi’s loyalty through the recent Soros infusion — he became part of Goldman’s initial Whitehall funds in the early 1990s.
Says Mr. Hamamoto, who took ski trips in Vail, Colo., with his protege, “Georgi is an animal on the slopes, and that’s the way he is in business.” In 1994, Mr. Hamamoto sent the extreme skier to Europe to expand the Whitehall funds’ reach, where he set up “a one-man real-estate shop” in Goldman’s fancy London headquarters.
Richard Georgi acquired more than 700 office buildings, of which are serviced by a staff of around 4,000 people. He bought $2.5 billion of distressed assets and 100 hotels, most of which were in France’s stagnant economy. “I had to go to the investment committee [Whitehall executives who approve deals] three times before I could invest in France.” Today, a hotel group he built up now owns one of Europe’s largest Holiday Inn chains.
After not being promoted to partner last fall at Goldman, Richard Georgi, saying that he was perhaps “pushing the envelope at Goldman,” met up with a former colleague who had moved to Soros. His friend told him that Soros was interested in real estate investing but just hadn’t found the right guy yet.
Mr. Soros has a history of staking large amounts of money on unusual, strong-minded individuals. In 1993, he hooked up with Canada’s Paul Reichmann, then fresh from the collapse of his family company, Olympia & York Developments Ltd. Mr. Reichmann’s U.S. investments greatly benefited the partnership. But some $1 billion of Mexican developments stalled when the peso foundered in the mid-1990s, and Mr. Soros took a loss when the Canadian bought Mr. Soros’s Mexican interest.
Mr. Soros dissolved the partnership in 1995, shortly before Mr. Reichmann repurchased his foundered Canary Wharf office development in London’s dockyards and made a bundle for his new partners. “Can you imagine someone being Reichmann’s partner, and then missing the opportunity to benefit from his biggest coup?” asks TrizecHahn’s Mr. Munk.
While Richard Georgi says he has no special plans to exploit the Soros name, he is eager to follow the renowned investor’s lead. “What I really admire,” he says, “is this ability to invest in any market at any time.”
Originally published August 18th, 1999 in the Wall Street Journal
