Sagamore Hill Partners, a new real estate investment firm, is anticipating a busy start to 2020, what with all the disruptions that have been roiling the retail industry. Principals of the business — Ripco Real Estate LLC partners Peter Ripka, Todd Cooper, Gene Spiegelman and Mark Kaplan — formed Sagamore with Alex Janoff, a partner and the chief investment officer, who was a vice president at Prospect Ridge, and its predecessor, the real estate investment team at AllianceBernstein. Prior to that, Janoff was a director on the acquisitions team at Acadia Realty Trust.
Leveraging Janoff’s investment expertise with Ripco’s deep real estate relationships — the firm is metro-New York’s largest independent retail leasing and management company — Sagamore Hill aims to uncover possibilities that aren’t always immediately obvious.
“There’s an opportunity, now that this retail transformation has occurred,” said Mark Kaplan, partner and chief operating officer. “Retail will be transforming for some time, but the massive transition has occurred. What we’re seeing now is a bottoming out.
“We’ve had institutions such as life insurance companies and well-established developers ask us to invest. They say, ‘Will you put money in the deal?’ They want us to put skin in the game and money behind our opinions.”
Sagamore’s equity percentage ranges from 10 to 15 percent up to 50 percent of a deal. The firm is pursuing a broad range of retail and mixed-use real estate investments, including both equity and debt deals, with a primary emphasis on the New York area.
Kaplan has a glass-half-full view of the economy, citing positive indicators such as record tourism in Manhattan in 2019. “I don’t think anyone thought that would happen with the current administration and the strength of the dollar,” he said. “The rents got lofty. If you were buying real estate at a heavy clip over the last five years, the world is different. There are still great pockets for new tenants to come in.”
Sagamore Hill invested in a Whole Foods-anchored shopping center under development in Parsippany, N.J., bought a funeral home on Long Island, which it subsequently closed and converted to retail, and acquired a strip center on Long Island, which it leased to Northwell Health. “We’re leasing Admiral’s Row at the Brooklyn Navy Yard,” Kaplan said.
“We have our finger on the pulse because Ripco represents 120 tenants exclusively in the tri-state area,” Kaplan said. “Institutional investors still rely on word-of-mouth intelligence because retail real estate data is unreliable. In terms of investments, retail is the only asset class where information is not readily available. We represent close to 500 properties throughout the region. We have the systems in place to capture that information in real time in a rapidly transitioning retail world.”
Kaplan cited “Glengarry Glen Ross,” the David Mamet play about real estate salesmen who find out they’re going to lose their jobs. “They’re looking for these hot leads,” Kaplan said. “They’re buying swampland. We’ve captured an independent local database. This is what I’m calling the ‘Glengarry Glen Ross’ lead: a nail salon with 12 locations actively looking. My property is missing a nail salon. I have 30 hot leads of nail salons looking for locations.”
Sagamore Hill Partners also helps retailers navigate the challenges of omnichannel retail. “Retail is moving very fast from online to brick-and-mortar, and from brick-and-mortar to online, which is the most interesting place, because new concepts are popping up every day on the Internet,” Kaplan said. “It’s a little bit of a contrarian play to be starting up a retail real estate investment company. We’re seeing a lot of potentially interesting opportunities.
“As retail changes and consolidates square footage, there may be a lot of vacant properties that need to find their next life,” Kaplan added. “The way retail space is being used is changing. That’s not necessarily a bad thing. If you look at areas of Manhattan with higher vacancy rates — that won’t last forever. The pendulum will swing back when retailers decide the optimum size of their stores.”
Long-term leases would help landlords recoup some of the costs associated with opening new stores. However, many retailers today consider one year to be a long period. “Sagamore Hill can really come into play through a partnership-first model,” Kaplan said. “We’ll be partnering with owners who want our expertise and maybe want some capital to help with a buildout or make up the reduced rent they’ll be getting.”