From left: Paul Pariser and Charles Bendit, co-CEOs of Taconic
Taconic Investment Partners co-CEOs Paul Pariser and Charles Bendit expect to purchase five to seven properties that could have a total value of $1.5 billion with the $220 million Taconic New York City Investment Fund it closed last month, which targets undervalued properties in the city. The fund’s investors include Taconic and four other U.S.-based funds, which they declined to identify.
The pair told The Real Deal in a Q & A this week that the Midtown-based firm’s fund could still pay 15 percent to 17 percent returns, despite the property pricing recovery in the city. They also discussed taking a multi-million dollar loss at 375 Pearl Street in Lower Manhattan that sold this summer for $53 million less than they bought it for in 2007.
Pariser and Bendit founded the owner and operator firm Taconic in 1997, and have bought and sold high-profile properties since. Its portfolio includes about 2,500 apartment units in Brooklyn and the Bronx, development parcels in Coney Island and it manages Google’s 111 Eighth Avenue, the 2.9 million-square-foot building Taconic and partners sold in December 2010.
What types of properties do you expect to target with the fund?
Bendit: If it is going to be office, it is primarily going to be in Manhattan. If it is residential or retail, it could be in the boroughs as well.
You said you could achieve internal rates of return of 15 to 17 percent. Is that still possible, since investment sales prices have risen so sharply in New York City over the past year?
Pariser: There is [still] a very large universe of assets that are in a situation of dislocation… where these returns are justified.
How many opportunities exist in NYC?
Bendit: We have to be very selective. We are only going to be making five to seven investments in this fund.
What is the total value of the properties you plan to acquire?
Pariser: I am sure on some transactions that are sizable we will partner with other institutional capital, and so we would have equity that would be greater than our $220 [million], plus debt could easily be $1 billion. Could be more. Could in theory be $1.5 billion.
Do you expect the weak recovery to slide again into a recession?
Pariser: We keep an eye on the potential for that, but whether we are going into a double dip or not, who knows.
Bendit: If there is another recession, the buying opportunities may be a little more abundant, but Paul and I are looking at real estate as a relatively long-term investment.
While you had successes with sales such as Google, on other deals you lost money, such as with the sale of 375 Pearl Street. What is the impact from that loss?
Pariser: The investors in that [deal] were ourselves with significant capital, and a real estate opportunity fund investor, [whose participants] have done a tremendous amount of business and have made money along side [us] many times. It was an unfortunate investment for us all and we all move on.