Summit Commercial Properties
Specialty: Buying properties out of favor and selling at a profit.
Recent deal: Bought $250 million worth of neighborhood shopping centers in Southern California.
Avid surfer and former cattle rancher Jack Mahoney has closed about $850 million in real estate transactions since joining El Segundo-based Highridge Partners, John Long's contrarian investment firm, in 1983.
Mahoney is president of Summit Commercial Properties, a Highridge affiliate that specializes in income properties. He describes most of Summit's transactions as "not very glamorous," but they've generally been profitable because of the Highridge-Summit strategy of buying properties that are out of favor and waiting for the market to turn.
This year, Summit is focusing on grocery-anchored neighborhood retail centers. The company has compiled a database on 4,500 such centers in California, has closed a dozen deals totaling $250 million this year and expects to complete 40 transactions by the end of the year up from 30 last year.
"We started doing this about October of last year, primarily because nobody else was doing it," says Mahoney. "Grocery stores are the retail sector least subject to changing because of trends. It's hard to buy milk on the Internet, and people still like to pick out their own tomatoes."
The contrarian approach has served Summit and Highridge well. Mahoney spent $85 million for 5,000 apartment units in a depressed Houston real estate market in 1986, selling all of them for $150 million by the end of 1994.
When nobody was buying office buildings in 1991, the company snapped them up at bargain prices. It has sold $60 million worth of them this year and will probably sell an additional $50 million worth by the end of the year, Mahoney said.
Mahoney says Highridge succeeds because it sticks to basic principles that Long established years ago: "We never do a deal just for the fees and we put our own money into every deal because it keeps us focused on our main goal, which is to make money by investing it."
Highridge's track record makes it easy to find investment partners, according to Mahoney. Finding good deals is the hard part. To do that, he and the rest of the Summit-Highridge team work long hours in what he calls "an intense atmosphere" where staffers "have to be the kind of people who want to be really busy and don't want a boring life."
The description fits Mahoney, who works 12-hour days and insists on squeezing in a surfing session "at least every other day."
An English Literature and philosophy major at USC and UCLA, Mahoney started his career working on a cattle ranch in Montana. "It was the '60s," he explains.
Betting against the crowd doesn't always work and sometimes takes longer than planned, he says, noting that selling the Houston apartments at a profit took "a lot longer than we expected."
Contrarian investing isn't always as easy as it looks, either. "Not every troubled situation is good to get into, and if you bet wrong, you can sit and lose money for a long time," he said.
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