Q & A with John Jacobsson from private equity firm Area, formerly Apollo

John Jacobsson is a partner with Area Property Partners, formerly Apollo Real Estate Advisors, a private equity fund manager based in Midtown. He has been associated with the company since it was founded in 1993.

Area has invested more than $11 billion in properties such as 1290 Avenue of the Americas, which the company purchased in foreclosure in 1993 together with partner Georgia-based Jamestown and sold in 2006 for $1.25 billion. Its current investments include the Apthorp condominium conversion and a portfolio of 47 Queens apartment buildings.

Jacobsson spoke with The Real Deal about the firm and how he viewed buying in a down market.

 
What is different between the early 1990s downturn when Area was founded and the current recession?
 
There are two big differences. First off is an obvious one, which is [that] most of the debt on commercial real estate in this country that was originated over the last 10 years is tied up in [commercial mortgage backed securities]. The second big difference… was the creation of the Resolution Trust Corporation [that] took whole loans owned by thrifts and banks that had failed and simply sold those off in big portfolios.
 
What impact will the CMBS structured loans have on the real estate market?

I don’t think we will really know for a couple more years exactly how it is going to play out.  
 
Is it more difficult to buy distressed assets today when Area itself has holdings that have fallen in value?

There was an advantage in the early 1990s with new opportunity funds being started because the teams running those funds did not have to deal with the legacy assets. They did not have the day-to-day discipline of having to asset manage deals that might or might not be performing all that well.  
 
Do you expect the local real estate market will continue to deteriorate?

New York City, like a number of other large cities, probably has more room to decline.
 
Area’s partner Vantage Properties has been criticized for its management of multi-family properties in New York City. How do you view those investments?

I am not really the appropriate person to comment on that side of our business.
 
An Area building in Boston was foreclosed on recently. Are there any buildings in New York that Area might relinquish to their lenders?

 I don’t think so. [But] there are a lot of buildings in New York that other people will give the keys back to.
 
What was the last building Area bought in New York City?

It was an apartment building [in Manhattan] called Two Bridges, and that was in the fall of last year.  
 
How are your funds holding up?
Better than most.