Growth Rate 389%
Executive: Marc Paul, co-founder and president
Early Days/Financing: In 1994 there was a damn big earthquake (Northridge) and there were suddenly a lot of earthquake-damaged properties that banks were taking back. We bought 107 properties from banks, fixed them up and sold them. We started out buying smaller properties, houses and apartment buildings. We developed a large group of private investors. From1994 through 1996, we began buying bigger properties. In the beginning, financing was 100 percent private investors, just like it is today.
Biggest Break: In 2002, the IRS came up with new guidelines for tenant-in-common deals. That IRS guideline really took us to a different level. Suddenly, we were able to attract much larger investors. Our average deal size now is $40 million. Back in 2002 it was $300,000.
Biggest Challenge: Reacting and making good decisions in the marketplace. In 2000, we had to decide if we should stay in the L.A. marketplace or expand nationally. We decided to go national. It actually came pretty easily, but it was the decision that was the hardest factor. We figured we were able to produce better cash-on-cash yields for our investors out of state than in state. Now, 80 percent of portfolio is not in California. We've added investment sales people in 22 cities.
Secret of Success: I think it starts with having a good idea, a real "Aha!" moment. There is a need for sponsors like SCI that can acquire pension-quality, institution-grade real estate and offer it to smaller private investors that want to do 1031 exchanges. Let's say you were doing a 1031 exchange and you wanted to invest $500,000 in the L.A. market. There isn't much you can get for that much. But if we show you a $50 million shopping center anchored by a Best Buy and Costco, you realize, "I could own a percent of that center instead of a tiny building on my own." The key to our success is a good business model that offers benefits for our clients.
What's Next: I can see us doubling or tripling that in the next few years. We expect to do more in New Jersey, Boston, and Florida.
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