Simon Development expands with new opportunity fund

By Amy Tennery | September 10, 2009 06:43PM

Simon Development Group, which helped open the Hill Country BBQ Market in Chelsea, is starting an opportunity fund for investors interested in distressed properties. The five-person team manages, redevelops and constructs residential properties, including Tower 31 at 9 West 31st Street between Broadway and Fifth Avenue. Its new fund, which has a target value between $50 million and $100 million, is the first for the nearly 20-year old group. The Durst Organization, among others, also recently stepped into the distressed assets field.

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Matthew Baron, a principal at Simon, is unflappably optimistic about the pursuit, insisting that the time is right for his group to initiate the fund. He expects properties to trade at bargain values over the next two years.

“We think 2010, 2011 [there will be] a good chance to buy assets that are trading [below] peak value,” Baron said. “And we think that there’s going to be an opportunity to acquire these assets.”

Baron said the fund would also target developments that aren’t necessarily in distress, but have some imperative for financial aid. Baron said he’s in negotiations to invest in an 80-unit residential building, which he declined to name, but noted that the institutional fund that owns it needed to create some immediate liquidity.

While market projections are all over the map, Baron insisted that Simon hasn’t bit off more than it can chew. He said that Simon’s past business deals have served as an ideal primer for this new venture.

“We’re doing the same thing we’ve always done,” Baron said. “Our main business is acquiring, renovating and renting apartments. At the end of the day, the core business is the same.”

But while he’s confident that good residential real estate investments will abound in the coming years, Baron was reluctant to call a market bottom. He attributes any recovery from the economic turmoil to ride out the market.

“[Success is] a function of dropping your price and realizing where the market really is, rather than holding the line,” Baron said.

Because this is the group’s first fund, Baron said it isn’t expecting to gather many large institutional partners. Simon is still assembling its investors and marketing the fund to interested parties.