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Probably because they invested in a TON of crappy facilities
bump...i've been watching Colony Northstar (now Colony Capital) for a while and have also been curious. Looking at their financial statements, it seems like they have some below market vacancy (healthcare vertical) and are just struggling overall. haven't taken a deep dive into their hotel vertical, but i remember reading something not too long ago that they were looking to (or would consider) selling their portfolio.....
would the general consensus be to stay away? what's the reputation on the street. if someone worked there for 2-3 years and went to get a new job, would having that name on the resume be more hurtful than helpful?
I think their healthcare vertical is mostly senior housing which would explain the vacancy. At the macro level, senior housing is undergoing a short term downturn given the influx of new supply. This hurts Healthcare REITs since they have such huge portfolios. There’s just a higher probability that they’re holding some older facilities that are now competing with modern, newly constructed facilities right next door. Also, REITs often partner with large, national management companies like Brookdale/Holiday/Sunrise , who aren’t as good managers compared to regional operators.
Even so, it would likely be good experience if they’re actively buying / selling properties. Maybe you’ll get experience working on a huge portfolio sale like the one Apollo just bought from HCP.
I have no personal insight though. You should call up someone at Fortress’ senior housing REIT (SNR). They’ll know what it’s like working for a struggling healthcare REIT with a big brand name backing it.
They're an AUM shop, they don't care about their investments. Barrack just wants to put out as much money as possible and collect fees.
I mean, to the extent that future AUM is predicated on successful investing, I doubt that Barrack "doesn't care about their investments."
Right... suffice it to say I think they're more focused on growing AUM than actually managing that money.
I get what you're saying, but it also makes sense to show strong projected returns now and raise as much money as possible while the getting is good (meaning there's a bunch of money to be allocated from investors and Colony wants as much as possible) rather than being selective on investments that will actually produce good returns and letting that money go to another shop that takes a more aggressive fundraising/investing approach.
The Colony Capital merger with both NorthStar entities was a play for AUM. Colony raised a big opportunistic fund pre-crisis that did terrible. They were slowing clawing their way back with their distressed fund series, yet those opportunities were drying up. Also their AUM was (~$20B) which was 1/3 to 1/2 the size of their main competitors (Starwood, Lone Star, etc). They wanted to make a big move, which enabled them to get their AUM over $54B+. Although they were forced to spinout Townsend which was about $14B.
Truthfully, I think NorthStar screwed them on the deal (and knew about their shitty deals), which is why Colony fired pretty much all the senior guys from NorthStar.
So, at what point do you say to yourself "stay away from the sinking ship"?
If they were still trying to deploy capital in newer/better investments, might be interesting. But, what if they decide 'nah, this is truly an AUM play. let's just keep the assets we have and try to re-position them/make them better and more competitive." They better have a good strategy.
What's the move when you're a 3rd party manager and there's individual owner/operators running the major ops?
The dirty secret of real estate PE, and PE in general, is that the founders and management don't primarily care about the quality of the investments - the entire game is gathering assets, particularly if the company is publicly traded (BX, CLNS, Carlyle, Apollo, etc.) because the street doesn't value the unrealized gains in each asset. Analysts give a much higher multiple to fee-based revenue because it's predictable, and given that the biggest portion of these guys' net worth is stock they are incentivized to raise the stock price (i.e. increase fee revenue by raising AUM), not by doing a ton of analysis and crushing it on a $100M deal.
Fair point. But we would be remiss to ignore the second order consequences of "not crushing it on a deal". If a fund continues to not do well, it will have a harder time fundraising in the future. So again, the two are inextricably linked.
I'd disagree. Having below-average performance on a given vintage doesn't hurt if you have the name brand. Check Carlyle's RE returns since inception - relatively lackluster, but they just raised their biggest fund ever. Once you've gotten a certain reputation and are allocator-approved performance becomes less and less important.
bump...would Colony Capital (fka Colony Northstar) hurt or help the resume? Bigger REIT, currently sucking wind a bit.
Let's assume you get in there and are involved in a strategy to right the ship and can get some good experience there. Would 1-2 years be a good stepping stone/temporary stopover?
Let's also assume you get in there and it stays stagnant or continues to decline. At what point do you save yourself?
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