Breakfast at Tiffany’s

The managing director of a private equity real estate fund talks about Trump, history and why his fund focuses on retail properties

July 11, 2015

About the author

Noam Ganel, CFA is the founder of Pen&Paper, a value-oriented, contrary-minded journal of the financial markets. Between 2010 and 2020, Ganel worked for Silvergate as Vice President in Capital Markets. He provides advisory services to family offices,  private companies, and financial advisors.

If you are looking for a second opinion, especially when considering big changes to your portfolio or strategy. Unbiased, professional insights can help you reexamine your assumptions and reduce emotional decisions.

Join the waitlist to learn more.

‍His office is scattered with legal documents. “I’m the opposite of a neat freak,” he says. “I tend to think better in a disorganized environment and prefer to concentrate on reading documents instead of organizing documents so the place will cleaner.” It must be the six-year annual return of 28 percent that assures investors of a capable management. It cannot be his office.

We enter an ordinary conference room, cups of coffee in hand. He begins to explain the philosophy behind the fund. “We prefer to invest in retail properties because of long term nature of leases,” he notes. “We just prefer business-oriented tenants that spend eight hours a day in our properties, and not most of the day, as some apartment building tenants do. It is a rational business environment.”

“We focus on institutional investors because we can understand them better,” he argues. “Take a private investor; more often than not, the return objective is ‘as high as possible.’ And in such  a mental state, our performance is always unsatisfactory. Conversely, we know our institutional investors park three-year cash for 2 percent. So investing in retail properties, after our fees, yields them a higher annual return plus a capital gains return. It makes sense.”

As we sit, his phone rings with an alert that Trump just won the Republican nomination. I don’t initiate a conversation on politics, but he does. “If Trump was able to make money in the eighties, in a rough environment, as New York was back then, it is not because of luck, but because he must be smart guy. I think Trump’s ethos is merely an act. And behind the character stands a solid individual.”

“Knowing some history, I see many similarities to Andrew Jackson,” he says. “In the early 19th century, folks were sickened by what Congress had become. Except for Washington, Congress was ruled, for over 50 years, by leaders that behaved closer to European Aristocracy than to what the Union valued. Andrew Jackson was the people’s voice.”

 He differs from other managers who dress lavishly and often prefer car racing. “I read a lot,” he says. “I admire history and, while Edward Gibbon said ‘history is little more than the register of the crimes, follies, and misfortunes of mankind,’ to me, history demonstrates the desire to run away from those evils.”   

Do you attribute reading to your business success? I ask. “It certainly gives me confidence to defend an opinion, and to study the past frees my mind from the present. Which I find calming. I tried other techniques, like meditation and going on retreats,” he gestures calmingly, “but it was a waste of my time.”

Our coffee cups are now empty. Feeling my time is limited, “Is a commercial real estate bubble about to pop?” I ask. “The answer lies in your bank’s balance sheet,” he says. “Relatively, it is well capitalized, and on the asset side, liar’s loans are gone. I don’t see any correction in value anytime soon. Just read the 2015 letter to shareholders that Warren Buffet wrote.” In an optimistic note, the day begins.