Dell dials up: How the tech billionaire quietly became a major real estate player

In real estate circles, Michael Dell’s name has become as omnipresent as his computers once were. 

In New York, his MSD Partners put together more than $1 billion in loans to refinance a Times Square office skyscraper and back the largest office-to-residential conversion in U.S. history.

In Dell’s stomping grounds of Austin, MSD is developing the city’s tallest office tower as the local headquarters for Google. In Boston, it chipped in on a $1 billion debt package in September to refinance the 36-story State Street Tower office skyscraper. In Miami, the company is investing in a slew of hotels, offices and condos.

Put those deals together and you’re looking at a firm that’s become an industry force.

“They’re not a public company, and because of that they’ve kind of flown under the radar,” said Newmark’s Dustin Stolly, who’s represented several landlords who have done business with MSD. “They have grown over the last five to 10 years into one of those groups that are on tier one.”

Dell, 58, who started his eponymous personal computer business in 1984 and is now one of the world’s 25 richest people, launched MSD Capital in 1998 with $400 million of his own money as a family office to diversify his substantial wealth. MSD Capital’s success attracted other ultra-high-net-worthers, and in 2009, Dell opened the platform up to outside money, rebranding as MSD Partners. 

In January, the firm merged with merchant bank BDT & Company, led by Warren Buffett’s investment banker Byron Trott, to form BDT & MSD Partners. With a combined $50 billion in assets, the partnership is positioning itself as the money manager for the 0.1 percent. 

It’s easy to see why the very wealthy are enamored with Dell, who in addition to being a revered entrepreneur is also known as a savvy dealmaker. That reputation is due in no small part to his $24 billion take-private of Dell Technologies in 2013, when he won over shareholders and took on corporate raider Carl Icahn.

His willingness to get into a scrap extends to real estate deals. 

In 2016, MSD bought a stake in the air rights over Grand Central Terminal while the train station’s then-owner, Andrew Penson, was in the midst of a bruising $1 billion lawsuit with the city and SL Green Realty, the mighty office REIT that’s New York City’s largest commercial landlord. 

And last year, MSD stepped into the high-octane political world when it financed CGI Merchant Group’s $375 million acquisition of the leasehold on the Trump Hotel in Washington, D.C. from the former president.

The company is also part of the syndicate that for three years has been battling Sharif El-Gamal for control of his 45 Park Place condo tower in Tribeca. 

MSD’s elevator pitch has been that it’s able to look beyond quarterly profits and five-year exits and stick it out for the long run to build generational wealth.

Family offices, after all, are not in the get-rich business. They’re in the stay-rich business.

Pie in the sky

Leading Dell’s charge is Gregg Lemkau, a wavy-haired banker who was widely considered to be CEO-in-waiting at Goldman Sachs before he surprisingly walked away from the investment bank in 2021 to take the helm at MSD Partners.

A representative for MSD declined to comment for this story, citing a quiet period during fundraising. But on a recent podcast, Lemkau said the company is focused on risk-adjusted returns, protecting its downside and compounding its investors’ capital over the long term.

“There’s a lot of capital out there and a lot of really smart people, so we’ve got to figure out what our edge is,” he said on the January podcast, Capital Allocators. “And we should only be investing in where I say to the team we’ve got a right to win.” 

Those advantages include Dell’s star power among the investor set, and patient capital. Unlike institutional investors who have to return funds on, say, a five-year timeline, MSD has what Lemkau calls “forever money.” 

“I don’t want to go and compete with Blackstone and Brookfield in real estate on price. We’re going to lose all day long,” he said. “But if we can compete on duration, we’ll do that.”

That patience was on display when MSD waded into the Grand Central Terminal brouhaha.

Penson had purchased the landmarked terminal in 2006 and with it, 1.2 million square feet of air rights overhead. If he could unlock those rights, the investor figured, he could make a fortune. In 2012, after the Bloomberg administration announced a plan to rezone Midtown East, it looked like his time had finally come.

But the City Council squashed the rezoning a year later, and the city instead gave SL Green the go-ahead to develop an office skyscraper, One Vanderbilt, next to Grand Central without having to purchase Penson’s air rights.

Penson sued the city and SL Green in 2015 for $1.1 billion in damages, claiming that the city deprived him of his property rights by greenlighting the tower. It was an ugly battle, and the following year, MSD stepped in and bought a stake in the partnership that owned the air rights for $63 million from an arm of the defunct Lehman Brothers.

Soon after, Penson settled.

“The complexity with that deal was to find a way to monetize the air rights. People had tried and been unsuccessful over decades,” said Jeremy Shell of TF Cornerstone, which also bought a stake in the Grand Central rights. “[MSD] locked it up at a time when it wasn’t immediately clear how they’d get the value out of it.”

In 2017, the city pushed through the Midtown East rezoning, and MSD and TF Cornerstone sold some of the air rights to JPMorgan for the redevelopment of its headquarters at 270 Park Avenue. MSD also sold some rights to TF Cornerstone and RXR Realty for their redevelopment of the Grand Hyatt at 175 Park Avenue, which will be Midtown’s tallest skyscraper when it tops out, years from now, at 85 stories.

And that’s not the end of MSD’s hairy-deal roster. 

Last spring, the company provided $165 million in debt to a group of investors led by Bruce Teitelbaum who had been fighting with the Durst Organization for control of a long-vacant 6-acre development site in Long Island City. The financing allowed the investors to pay off the mortgage they owed Durst and move ahead with plans for a large mixed-use project.

“MSD was aware of the situation,” Teitelbaum’s attorney Jay Neveloff said at the time. “They were aware that Durst was going to do almost anything it could to make it more painful and difficult. And they stuck it out.” 

Fried Frank’s Jon Mechanic, who’s worked on several deals involving MSD, said he doesn’t believe the company seeks out complicated deals. 

But, he said, it doesn’t run from them, either.

King of the castle

For years, one of New York real estate’s great mysteries was the identity of the buyer who paid a record-shattering $100 million in late 2014 for a duplex penthouse atop Extell Development’s supertall One57.

The secret was finally revealed in early 2018: The buyer was Michael Dell. 

His homes also include a sprawling Austin-area mansion dubbed “the Castle” not far from where Dell Technologies is based, a penthouse at the Four Seasons Private Residences in Boston and a 4.3-acre Hawaiian compound nicknamed the “Raptor Residence” in a gated community where his next-door neighbor is former Wells Fargo CEO Paul Hazen.

Forbes pegs Dell’s net worth at $50 billion, but the catalyst for much of MSD’s recent growth has been an expanded investor base so the company can outlive him.

“At some point in his lifetime or shortly thereafter, [Michael’s] plan is to give all his money away and doesn’t want that to cripple the firm,” Lemkau said.

In New York, the company is headquartered at SL Green’s One Vanderbilt, the same project that Penson battled against. MSD’s real estate equity team is led by Coburn Packard, a veteran of Lehman Brothers and Apollo Global Management. The real estate credit side is run by Jason Kollander and Adam Piekarski, both longtime stalwarts of the firm. 

Their list of real estate investments is long, and it’s not limited to property-level deals. MSD owns a 7.5 percent stake in Related Companies, which it purchased in 2007 alongside Goldman Sachs. And the company last year paid $200 million for a roughly 9 percent stake in the ground-lease company Safehold. 

Safehold CEO Jay Sugarman said on a February earnings call that the investment provides a long-term source of capital to build its Caret subsidiary, which allows investors to earn a piece of the growing value from Safehold’s ground leases.

 “The goal with the MSD negotiations was to really build out Caret in a fully fleshed-out form that will take us for many, many, many decades,” he said.

Dell looked back at many of the deals that helped build his fortune in his 2021 memoir, “Play Nice But Win: A CEO’s Journey from Founder to Leader.” 

Despite the amiable title, a large portion of the book is dedicated to his war with Icahn, who tried many things to stymie the Dell Technologies buyout and pushed for a higher price.

When the New York Times asked Dell if, apropos of the book’s title, he eventually found a way to play nice with Icahn, Dell quipped back. 

“Let’s not forget the full title of the book,” he said. “There’s also the ‘winning’ part.”