Ex-Praedium pros setting up shop

Real Estate Alert, March 17, 2004

Two former Praedium Group executives have formed a company that will buy out-of-favor properties with value-added potential.

New York-based Artisan Realty Capital will seek to exploit relationships that founders Jeffrey Granowitz and David Domm formed over the years. The company will locus on purchases of East Coast and Midwest office, apartment, retail and hotel properties that may not be appealing or widely marketed to the broader investor community. Artisan plans to invest in both equity and debt, and will consider distressed loans, mezzanine debt, bridge loans and preferred equity, among other products.

Granowitz and Domm left Praedium, a New York opportunity-fund sponsor, last year to start their own firm.

At Artisan, they'll employ a value-added strategy that will target assets priced under $50 million. The firm will seek an internal rate of return of about 18%. Artisan will fund its acquisitions with capital from private investors at first--but it's likely that it will eventually adopt a commingled-fund format. The plan is to raise roughly $100 million of equity for future investments, probably starting in the third quarter.

For now, however, Artisan won't place as much emphasis on raising equity as it will on capitalizing on what Granowitz and Domm view as abundant buying opportunities. "We've been thinking about how to capture the deal flow we're beginning to see," Domm said. "We're looking for these reposition plays that are, because they're complicated, not for everybody."

Domm said Artisan is especially interested in complex deals that could involve various types of distressed assets, bankruptcy risk or underperforming debt. Artisan may also get involved in construction projects. "There is currently too much equity capital chasing the same opportunities and there is less capital targeting complex and less obvious situations," Domm said.

Granowitz, a managing director, was a principal at Praedium. Before that, he served a stint at Credit Suisse First Boston. Domm spent three years at Praedium as an analyst focusing on East Coast and Midwest acquisitions, asset management and dispositions.