Greenwich may seem like an unlikely breeding ground for a revolution. But Brandon Lacoff, the 44-year-old co-founder and CEO of Belpointe, never considered setting up shop anywhere else.
The tony town in Fairfield County is home to many family offices, Belpointe among them, and the Lacoff family has been there since 1980. Belpointe’s headquarters is housed on the top floor of a refurbished 1920s-era bank along Greenwich’s main street. Marty, Lacoff’s father and Belpointe’s chief strategic officer, answers the door with a headset on when a receptionist isn’t around.
An unmade queen-sized bed occupies a corner of the office. One of the family’s 12 lines of business, the younger Lacoff explained, is a therapeutic mattress startup called SleepOvation, founded by his cousin Richard Codos. Real estate, however, has always been a Lacoff family focus.
Lacoff’s sister, Stefanie, works at Houlihan Lawrence, where she handles sales at Belpointe’s latest condo development, the Beacon Hill II complex in Greenwich. Marty, who had a brief stint as a developer, once cut an extra window in his office wall so he could talk with a colleague without leaving his desk.
“We’ve always taken a more hands-on approach,” Lacoff said. “We’re a Berkshire Hathaway, but without the billions.”
Game of zones
As of last year, Belpointe’s wealth management group had nearly $1.3 billion in assets under management, which is about $500 million more than the average family office, according to a Campden Wealth’s 2018 global family office report.
Belpointe’s businesses include a law firm, three insurance companies, a real estate development group and, most recently, its new non-traded public real estate investment trust, Belpointe REIT.
Designed to capitalize on the increasingly popular federal Opportunity Zone program, which allows investors to defer capital gains taxes by investing in specially designated areas for development, Belpointe REIT is hoping to raise $3 billion in six years — or about $500 million per year.
Trained as a tax lawyer, Lacoff had been working on structuring a REIT for Belpointe’s clients for months when the OZ program sprang to life last year following the Trump administration’s late 2017 federal tax overhaul. Lacoff sought to combine elements of both a REIT and an OZ fund, and Belpointe sees as its next big play an entity that invests in properties located in roughly 8,700 OZs across the country.
Although Belpointe REIT is public, it’s not yet listed on a stock exchange. Lacoff expects it to start trading on the Nasdaq or New York Stock Exchange in six to eight years. By June, Belpointe REIT is expected to hit the $50 million mark and, later this year, the family office plans to invest $10 million of its own capital gains into the REIT.
“It’s something that’s never been done before,” explained Lacoff, adding that Belpointe filed its paperwork with the U.S. Securities and Exchange Commission in August 2018, months before Anthony Scaramucci’s SkyBridge Capital subsequently made headlines for forming a $3 billion private REIT to invest in OZs. (SkyBridge has the only other known OZ fund structured as a REIT; partnerships have been the most common structure for such funds.)
Lacoff said Belpointe and SkyBridge worked with the same OZ advisory group at KPMG and, after Lacoff began speaking about Belpointe’s plans at conferences, SkyBridge and Scaramucci adopted a similar REIT structure. During a conference call for investors last December, the so-called Mooch appeared to take credit for the idea.
“I suspect our competitors… once they understand our structure… [will] start copying it,” Scaramucci said. EJF Capital founder Manny Friedman, SkyBridge’s former sub-adviser for the REIT, said on the same call that they had “first-mover advantage.”
SkyBridge president and COO Brett Messing said in a statement to The Real Deal that his firm and Belpointe are not in talks, and that SkyBridge did not get the idea for its fund structure from Belpointe or KPMG.
“Our goal was to create a user-friendly structure similar to BREIT [Blackstone Real Estate Income Trust], which is a very successful product in our various distribution channels,” Messing said. “As a point of reference, our launch preceded Belpointe.”
Lacoff doesn’t hold it against them. “There’s no animosity at all,” he said. “We’re the first and only public Opportunity Zone REIT. That’s what matters.”
Belpointe is open to co-investing in OZ projects with competing funds, Lacoff said, including SkyBridge, which in January found a new sub-adviser for its OZ fund in Wilton, Connecticut-based Westport Capital Partners.
SkyBridge’s REIT made its first SEC filing in December, although Scaramucci began speaking publicly about the fund a month earlier. Belpointe REIT, whose first securities filing was in August, publicly announced its formation in March.
Timing and structure aside, Lacoff noted that Belpointe also has a distinct fee structure that undercuts its competitors. “We’re trying to provide a service for as little cost as possible,” he said.
Belpointe’s annual management fee is .75 percent, carried interest is 5 percent and the minimum contribution from investors is $10,000, Lacoff said. Among competitors in the funds space, minimum investments can be upward of $100,000, while management fees generally average around 2 percent with carried interest between 20 to 25 percent.
In order to remain profitable at lower rates, Lacoff said he turns to companies within the Belpointe family. For example, Belpointe’s in-house legal arm helped create its REIT, a total cost that came to about $100,000, a fraction of the $500,000 to $1 million that an outside law firm might charge for such work. Lacoff wants to put those savings back into Belpointe.
“What Uber did to the taxi business is what we’re looking to do to the real estate investment business,” he boasted.
Growing up in Greenwich, Lacoff knew he wanted to be an entrepreneur. He attributes that ambition to dinner table discussions with his father, a wealth manager who cycled through several different ventures.
Greg Skidmore, a Belpointe partner and president of the family office’s asset management division, described his friend’s family life as business-oriented.
“I remember Brandon talking to me about buying and selling stocks at like 11,” said Skidmore, recalling that as they grew older, Lacoff was obsessed with “trying to put together deals.”
But that upbringing didn’t generate immediate financial riches. Marty told Lacoff to “go get a real job” after graduating from Syracuse University, he said. Lacoff went on to earn a law degree and MBA from Hofstra University, which led to a job at now-defunct accounting firm Arthur Andersen. A few months after that firm collapsed amid the dissolution of energy giant Enron, Lacoff landed at Big Four audit outfit Ernst & Young, where he spent more than two years.
It was during that time that Lacoff began buying rental units, mostly in Greenwich, with Ronald Young Jr., a friend from high school who is now on the board of Belpointe REIT. In 2004, Young and Lacoff heard through a mutual friend about an estate sale where dozens of sponsor co-op units in Long Island City and Manhattan would be up for grabs. They spent about $6 million in cash to buy about 15 units, which the duo renovated and resold.
The success from that deal gave Lacoff the gumption to strike out on his own a few days before his 30th birthday. He left Ernst & Young in late 2004 to start the office that would eventually grow into Belpointe. Like many upstarts, Lacoff began by running the business out of his parents’ basement, although in Greenwich this was not a standard subterranean space but a 3,000-square-foot above-ground suite that opened out onto a pool.
Belpointe’s assemblage of companies slowly took shape as each partner — who either wholly owns his own division or splits the equity with Lacoff — joined the family office. Despite Lacoff’s affinity for real estate, Belpointe’s property arm didn’t get off the ground until 2010, when Lacoff met Paxton Kinol, a former director at AvalonBay Communities, a national apartment REIT, through a mutual friend. The prolific residential developer, formed via a 1998 merger, has gradually accumulated one of the largest rental portfolios in the country.
Kinol and Lacoff shared a view that the multifamily sector was set to boom following the 2008 financial crisis, and they began investing together. Kinol now leads Belpointe’s real estate group, where he handles the underwriting and vetting of each deal and oversees the local developer that Belpointe brings on for joint ventures.
Those joint ventures usually involve an established developer bringing off-market deals to Belpointe for programmatic funding — “That’s the holy grail for us,” Lacoff said — or right of first refusal. Belpointe helps experienced developers, some of whom were once in-house at large companies, start independent firms with the same funding agreements.
Belpointe will provide its joint venture partners with such resources as sample budgets, checklists and manuals, said Kinol, adding that AvalonBay used similar joint venture deals to bring smaller developers into its fold. Belpointe expects to close this month on its first OZ development projects in Knoxville, Tennessee, and Vancouver, Washington.
“Brandon… saw this opportunity before anyone else,” said Kinol, whose projects now include the Pinnacle at Waypointe, a 331-unit mixed-use complex in Norwalk.
Lacoff’s multifamily development success or prowess on the OZ conference circuit probably won’t ever eclipse his biggest claim to fame. It was Thanksgiving 2011 when he, Skidmore and a Belpointe trader named Timothy Davidson claimed a $254.2 million Powerball jackpot in Connecticut.
At the time, the three were initially reported as the winners, with Davidson purchasing the lucky $1 Quick Pick ticket at a Stamford gas station. When asked whether that story is true, Lacoff smiled and declined to comment. It subsequently emerged that Belpointe had accepted the winnings on behalf of a client.
Lacoff sought to clear up some confusion, admitting that the real winner was a Belpointe client identified and vetted by Connecticut’s lotto commission, and that he, Davidson and Skidmore came out publicly as trustees for the Putnam Avenue Family Trust, which directed the money to the still-anonymous winner. Belpointe’s condition for claiming the jackpot was that the winner donate $1 million to charities that help veterans, which Lacoff said was satisfied.
“We felt it was worth the pain for a couple weeks,” he said, when asked about the scrutiny of his Belpointe brethren.
Belpointe has yet to hit the jackpot with another client — at least in the sweepstakes arena. A few winners have approached Belpointe, Lacoff said, but they ultimately declined to accept the firm’s terms of giving $1 million to charity.
Belpointe’s other stipulations, however, have made REIT-formation-world waves.
“Whoa!” was the shocked reaction of Steve Glickman, a former senior economic adviser in the Obama administration and one of the architects of the OZ program, when told of Belpointe REIT’s fee breakdown. “That’s a fee structure that’s far below almost all of the market,” he said. “That is not a very sustainable model for most fund managers.”
Glickman, now a founder and CEO of Develop, an OZ advisory business, said he had not previously heard of Belpointe and wasn’t familiar with Lacoff or his team.
Lacoff shrugs off the surprise. His response when asked how Belpointe REIT can afford to undercut the market is that “we will make more money ourselves because we can grow something much larger.” Lacoff estimated that Belpointe is about two-thirds cheaper on management fees and three-quarters lower on carried interest than its competing funds, partnerships or REITs.
“I’m sure [our competitors] are not happy with me having such a low fee,” Lacoff said.
Old boys’ club
As with any good deal, Belpointe’s low fees come with a catch. Belpointe REIT does not pay commissions to financial advisers or broker-dealers because Lacoff believes such practices are a conflict of interest. Kinol described the situation more bluntly.
Private placement REIT and private equity “are both based on kickbacks for money raising… [and] since we’re not doing that, people are not happy,” he said. “Some companies have chosen not to list us.”
Kinol and Lacoff declined to discuss which companies shunned Belpointe REIT, but noted that Charles Schwab and E*Trade both list it, with TD Ameritrade in the process of doing so. But the fact that some wirehouses — basically broker-dealers ranging from large financial institutions to regional brokerages — are not putting Belpointe REIT on their platforms means that it’s effectively blocked from certain deals unless potential clients go off-platform to Lacoff directly.
Growing a business requires both clout and trust, said Jay Blaivas, who spent a half-dozen years doing real estate tax work as an in-house lawyer at the Blackstone Group. Now a partner specializing in REITs and real estate-focused funds at the global law firm Morrison & Foerster, Blaivas knows firsthand the challenges in getting a new fund off the ground.
“You can have the best idea, but if the company doesn’t have the reputation and the personnel to convince investors that it’s a place where their money is safe and will do well, it’s just not going to happen,” he said.
Blaivas noted that partnerships are the dominant structure in the OZ space because most sophisticated advisers don’t need access to liquidity over a long investment period and would rather leave exit decisions to an investment manager.
“There’s a reason why hundreds of billions of dollars are invested in funds,” Blaivas said.
To Belpointe’s Skidmore, the battle for his firm and Lacoff will be getting enough traction to establish itself amid the “good ol’ boys’ network” through which most large-scale real estate investments are packaged and sold to clients.
“It’s worth fighting the fight,” added Skidmore, even though “the financial industry doesn’t always like underdogs.”
Without the distribution of major platforms, retail investors will be harder to reach — as will Belpointe’s $3 billion target. But Belpointe could also realize its growth aspirations through acquisitions, Kinol said.
Some OZ funds might not have enough deals in their pipeline to deploy all of their capital gains — or simply not have enough money to complete a deal — and could sell themselves to other OZ funds. Kinol believes that Belpointe will be one of the last firms remaining when consolidation comes to the OZ investment space.
Lacoff, standing in Belpointe’s Greenwich office near a conference room whiteboard filled with REIT diagrams, expressed confidence in his plans to alter the OZ investment landscape.
“What’s great about the structure is this is a perpetual product,” he said. “It’s going to be the next AvalonBay stock.”