Ramius Capital investing in NJ

Real Estate Weekly, August 12, 1998

The three principals are Peter Cohen, former chair of Shearson Thomas Strauss; a former president of Salomon Brothers; and Morgan Stark, an investment banker.

According to Michael Boxer, a former Shea & Gould attorney who is now manager of the real estate portfolio for Ramius, they conduct convertible arbitrage, manage a private equity fund, and manage what Boxer calls "a fund of funds."

Boxer invests both firm money and investment assets in real estate-related investments that at one point included the largest purchase of tax liens in Nassau County.

Recently, Ramius formed a management company with Philip Eisenberg. Known as Urban American Management Corp., it is jointly owned by Ramius Capital and Urban America Housing Corp., Eisenberg's own management company.

"I put together the capital and help manage the deals, and Philip manages the properties," explained Boxer. "He's a methodical, hands-on manager."

Eisenberg owns property in the boroughs and was involved in home building in Florida and Puerto Rico.

The 40 buildings located in Union City and West New York are within two miles of each other, making management control, upgrading and repairs easier.

Rent control in New Jersey is not the same as New York's. "It's more equivalent of the stabilization codes, albeit with more liberal pass-through," explained Boxer. In Union City, an owner can pass through capital improvements to individual units at 1/20 of the costs, rather than the smaller New York City percentages, so there is a quicker return.

Average rents in the buildings are $419 a month in a marketplace that can support $550, Boxer noted. Plus, he says the middle-class Cuban Americans who rent the units are begging for repairs and have expressed a willingness to pay additional rent so they can be proud of their homes.

"These are very hard-working families that are religious and care about their environment," said Boxer. "There is very little graffiti, no bars on the windows, and a strong and emerging retail presence along Bergenline Avenue."

A Blockbuster has come in, joining a Modell's, a GNC and McDonalds. "All these are a new retail presence," said Boxer.

In addition, Forest City Rather is building a 375,000 square-foot shopping center nearby.

The group has met with Mayor Rudy Garcia of Union City on numerous occasions, and he has expressed a desire to improve his housing stock, added Boxer. The Mayor of West New York, Albio Sires, has also been responsive.

"They have both expressed a willingness and desire to improve the housing conditions of their residents," he said.

That also means the Ramius group is looking for more product in the area.

"I'm looking for anything with good value," Boxer said. "They were in bad enough condition to allow me to buy them at a good price, and in good enough condition so that with some directed management effort, you could substantially increase their value." Now, he wants to do the same with more.