Turner Woodard, the longtime local owner of the historic Stutz factory complex in downtown Indianapolis, has sold a majority of his ownership in the 400,000-square-foot property he rescued in the 1990s to real estate investment firm SomeraRoad Inc.
The deal, which closed Thursday, includes both the Stutz Business and Arts Center at the corner of 10th Street and Capitol Avenue, and the property known as Stutz II, which sits adjacent to the south.
Both Woodard and SomeraRoad declined to discuss financial details of the transaction, including the sales price and the percentage of ownership that Woodard and his son Turner John “T.J.” Woodard retain.
SomeraRoad CEO Ian Ross said he is not yet prepared to reveal his firm’s plans for the building, other than to say that it intends to retain the historic character of the 110-year-old property.
“We love its authenticity, its architecture, its spirit, and our goal really is to preserve that,” he said.
The Stutz complex was built in 1911-1912 by Harry Stutz, who founded the Stutz Motorcar Co. The facility produced cars until 1935, when the Great Depression forced the manufacturer to close. Eli Lilly and Co. purchased the complex in 1940 and operated a packaging division there until 1982. The property then stood vacant until 1993, when Woodard purchased it.
Woodard redeveloped the property and subdivided it into tenant spaces ranging in size from 150 square feet to more than 6,000 square feet. Today, the complex is about 90% occupied and has 200-plus tenants—dozens of artists have studios there, but tenants also include a range of manufacturing and tech companies.
SomeraRoad will work with existing tenants, the Stutz Artists Association and neighbors to determine “what makes most sense to take this building into the next phase,” Ross said. “We want to be as locally-minded and locally-oriented as possible. We don’t want to disrupt anything that’s here already.”
Woodard said SomeraRoad’s plans include numerous physical upgrades such as installing a new heating and air conditioning system, new elevators, and likely new windows and skylights. Plans also call for a new museum-type space for Woodard’s car collection, which will be relocated from its current space on the second floor of the building.
“It’s a landmark property,” Woodard said of the Stutz complex. “They’ve promised to keep it that way and make it better.”
Artist Amy Carroll, a Stutz tenant and the president of the Stutz Artists Association, said SomeraRoad has already met with some of the building’s artists. Based on that meeting, Carroll said she’s optimistic that the new owners will bring vibrancy to the building.
“They definitely said they want to keep the arts highly involved,” she said.
Carroll also acknowledged that some of her fellow artist tenants are more tentative and concerned, especially amid the pandemic and its uncertainties.
“Change is hard, and it’s (the ownership change), an unknown in a time of unknowns,” she said.
As recently as 2018, Woodard told IBJ that he was not interested in selling the Stutz.
“There’s been plenty of interest over the years, but it’s just not for sale,” the developer said at the time.
Woodard, 72, said several factors helped changed his mind: SomeraRoad wanted to retain the Stutz’s historic character, and the firm was persistent, contacting him several times over the past year to express interest in buying the property.
“That told me that they truly were interested,” Woodard said. “It wasn’t a passing interest.”
SomeraRoad, which has dual headquarters in New York City and Nashville, Tennessee, had the good timing to approach as he was working on his estate planning and thinking about the long-term future of his properties, Woodard said.
The new owner is bringing in the real estate firm Colliers to handle leasing and property management, employing many of the dozen or so people who had worked at the building for Woodard’s management company, Turner John Management.
Woodard said a few of his management employees are staying with him, and both he and they will relocate by the end of the summer to launch a new redevelopment project that he’s not yet ready to discuss.
“Stay tuned,” he said.
Formed in 2016, SomeraRoad has done more than 50 projects around the United States, with a focus on acquiring and redeveloping properties in markets like Nashville, Louisville, Pittsburgh and Kansas City.
The firm has done some other deals in the Indianapolis market. In November 2019, SomeraRoad and Farmington Hills, Michigan-based Friedman Real Estate acquired the former Marsh Supermarket corporate offices at 9800 Crosspoint Blvd. in Fishers. The two firms sold the property last year to local tech firm Knowledge Services.
SomeraRoad also acquired, and later sold, several of Marsh’s former grocery store locations.
Colliers International will start overseeing a 26.2-acre office campus in Overland Park that recently changed hands and underwent a rebranding.
SomeraRoad Inc. hired Colliers to manage 5200 Metcalf Ave., a five-story building just south of Interstate 35 with nearly 300,000 square feet of leasable office space.
SomeraRoad, a New York-based commercial real estate debt and equity investment firm, bought the property in late July from Lexington Realty Trust, a New York-based REIT focused on single-tenant commercial properties, for an undisclosed sum.
5200 Metcalf was left vacant in December 2018, after then-Missouri Gov. Eric Greitens lured Swiss Re to One Kansas City Place in Downtown with $20 million in incentives. Cargill also moved out in late 2018 when it consolidated its area offices in Olathe.
In 2019, Lexington Realty Trust’s lender foreclosed on 5200 Metcalf, after the New York-based REIT reportedly had not made payments on the building’s loan since Swiss Re’s departure.
As of June 30, 2020, Lexington had an outstanding aggregate principal balance of $50,525 for nonrecourse mortgage loans secured by 5200 Metcalf and a second office property in Boca Raton, Fla., its latest quarterly report shows.
5200 Metcalf — now rebranded as Summit52 — no longer is in default, foreclosure or receivership and is “ripe for repositioning,” SomeraRoad Vice President Basel Bataineh said in a Monday release from Colliers.
Summit52 offers flexible floor plates with as much as 78,000 contiguous square feet on a single story. The building could accommodate users as small as 4,000 square feet or serve as corporate headquarters for a single tenant occupying its full 300,000 square feet.
SomeraRoad also immediately is slated to begin renovations of the lobby, café, conference facilities, fitness space and multiple outdoor patios, according to Colliers’ release. The current 679 parking spots could be expanded to as much as 1,622, leasing materials show.
“Our new ownership team is well-capitalized and ready to do deals,” Bataineh said in the release. “We know the greater Kansas City market well, and we are excited to transform Summit52 into a modern workplace destination just like we have done with the 3Y and Lightwell buildings” — the firm’s previous two office acquisitions in the metro area.
Colliers’ Kansas City office’s Management Services Group oversees a portfolio of more than 8 million square feet of third-party commercial real estate investments.
Somera Road Inc. will open a second headquarters in mid-July in Nashville, a move that comes as the New York-based commercial real estate firm continues to gain a presence throughout Music City
A release does note the location of the future office.
Somera Road’s primary headquarters will remain in New York City. However, two key senior team members of the company — Jonathon Reeser, vice president of acquisitions and Joe LeMense, vice president of construction — will relocate to Nashville to co-head the office. The two will soon be hiring additional employees to bolster the local presence.
Somera Road’s Nashville portfolio includes the Voorhees/Downtown Antique Mall site on Eighth Avenue South in The Gulch (read here), WeHo Crossing (read here) in Wedgewood-Houston, 501 Great Circle Road in MetroCenter (home to Nashville-based JumpCrew; read here) and PINS Mechanical Co. in the North Gulch. The company plans to soon announce future projects for Wedgewood-Houston, Germantown and East Nashville.
“Nashville is a perfect second headquarters as we continue to grow our foothold and development pipeline in [the city],” Ian Ross, Somera Road managing principal, said in the release. “Nashville’s proximity to other focal markets with active projects such as Memphis, Louisville, Kansas City and Indianapolis is an added perk.
“The markets we invest in offer an unparalleled value proposition to both employees and employers, offering a lower cost of living and a higher quality of life in forward-thinking, hyper-connected live-work-play environments,” Ross (pictured) added. “Nashville was a natural choice for our HQ2, as it simply reinforces our firm’s primary investment thesis over the past five years.”
Somera Road garnered headlines in mid-March when it announced it had offered a $17 million property purchase and leaseback package as an alternative to the Watkins College of Art and Belmont University merger announced in late January (read here). That effort did not materialize.
The announcement of the future Nashville co-headquarters follows Somera Road’s launch of a division focused on ground-up development. Andrew Donchez, formerly with Boca Raton, Florida-based Mill Creek Residential, will oversee the division as vice president, head of development. Donchez is expected to spend some time in Nashville given Somera Road’s multiple projects in the city.
Despite the pandemic, one national retailer is making plans to expand in St. Louis.
Dollar Tree (NASDAQ: DLTR), which has more than 60 locations throughout the region, has signed a long-term lease for roughly 11,000 square feet at Village Square in Hazelwood, the once-defunct shopping center that New York-based Somera Road Inc. bought in late 2018. Terms of the Dollar Tree lease were not disclosed, but the retailer is expected to open this summer.
“Dollar Tree is a recession proof business. Their low price point attracts a variety of shoppers, and they are positioned to excel in both good and challenging economic times,” said Michael Ervolina, senior associate at Somera Road.
In addition to Dollar Tree, Axes Physical Therapy and civil construction firm Millstone Weber, which is working on the Interstate 270 project, also signed new leases at Village Square. Concentra urgent care also signed a long-term extension of its lease at Village Square. The leases follow the more than $1 million Somera Road has invested in facade improvements to the property at Lindbergh Boulevard and Interstate 270.
Ian Silberman of Location CRE and Rob Goltermann of DCM Group represented Somera Road in the leases.
Although the pandemic hasn’t impacted the center’s leasing, it has led to Somera Road to pause its grant program that would have given free rent and startup capital for small businesses and entrepreneurs. Over 200 applicants applied but the final “Shark Tank” event that would have determined the winners has been postponed until it is safe to hold the event publicly, Ervolina said.
Retail space in north St. Louis County leases for $10.87 per square foot on average, the lowest across the St. Louis metro area, according to the latest available data from Newmark Grubb Zimmer.
Somera Road acquired the property from special servicer LNR Partners in late December 2018 for $2.3 million according to data from Reonomy. At the time, Village Square was appraised for $4.2 million but owed more than $18 million on its mortgage.
By Steph Kukuljan – Reporter, St. Louis Business Journal
Apr 27, 2020, 2:15pm CDT
The Somera Road team is proud to announce our newly acquired controlling interest in SouthSide Works – Pittsburgh, PA, a mixed-used development located on Pittsburgh’s South Side Neighborhood. As the new owner and operator we are excited to reintroduce the project with a renewed vision, plans for re-development and plans for new development. In total, Somera Road will invest over $37 million in capital improvements including an adaptive-reuse conversion of a former cinema into a modern 77K sf, open floor plate, creative office space called, “The Box Office”.
We are also deep in planning of the construction of a new multifamily development which includes 230 Class-A apartments on developable waterfront land controlled by the venture. Somera Road’s SouthSide Works will be a wholistic re-envisioning of what a modern live-work-play community should look like along the riverfront of one of America’s fastest growing, most exciting cities. Our goal is to integrate the best that Pittsburgh already has to offer with Somera Road’s specialty – adding new thinking, an entrepreneurial approach, and creative innovation.
A New York real estate developer paid $30 million on Dec. 16 to gain another Nashville development for its portfolio.
Somera Road Inc. now owns about 2.6 acres on Eighth Avenue South, near the Gulch and restaurants such as Arnold’s Country Kitchen and Party Fowl. The developer will turn two existing buildings into about 81,000 square feet of commercial space — mostly office space, with some retail as well. Renovations will begin after Christmas and be ready for tenants in the third quarter of 2020, said Charlie Gibson, a broker with Cushman & Wakefield who represented Somera Road in its purchase.
The most noticeable building on-site is the Voorhees Building, at 700 Eighth Ave. S. Somera Road plans to add a penthouse level to the four-story brick building that could be office space or a restaurant/bar, as depicted in the promotional video below.
Somera Road also will preserve the building at 606 Eighth Ave. S., which abuts the train tracks that run through the Gulch. That building, currently known as the Downtown Antique Mall, will be turned into office space and retail.
Low-rise buildings between and behind those two buildings will be demolished to create parking for future tenants.
There’s been a flurry of deals along Eighth Avenue South just in the past couple of months. Another New York-based investor bought the Cannery Row complex of music venues in October, on the other side of the train tracks from one end of Somera’s new property. Dallas developer Lincoln Property Co. bought a site just up the road, at the roundabout with Korean Veterans Boulevard. Construction is underway on Lea Avenue of an apartment skyscraper.
Somera Road is developing a mixed-use project in Wedgewood-Houston and paid $18 million earlier this year for a MetroCenter office building. Somera Road also this fall debuted a revitalized building in the Gulch with two entertainment venues: 16-Bit Bar + Arcade, and Pins Mechanical Co.
In its newest purchase, Somera Road paid about $265 per square foot of land — an indicator of how Nashville property values keep rising, years into the “It City” surge of growth.
Somera Road bought the land from Harmolio LLC, a New York-based entity whose managing member is Arthur Friedman, according to Davidson County public records. There were six properties in the purchase: 606-620 Eighth Ave. S., as well as 700 Eighth Ave. S., 701 Seventh Ave. S. and 708 Fogg St.
Loomis Cos., of Euclid, Ohio, is handling construction, according to Metro permits.
By Adam Sichko – Senior Reporter, Nashville Business Journal
Dec 17, 2019, 11:25am CST
Friedman Real Estate recently sold 2600 Wirsing Parkway in DeKalb, Illinois.
The property is a 202,000-square-foot, five-star distribution facility that was vacant at the time of sale. Kellen Duggan and Victor “Torrey” Lewis in Friedman’s Chicago brokerage office represented the seller, Somera Road, a New York-based commercial real estate investment firm, in the transaction.
“[Screw] funds,” Somera Road principal and founder Ian Ross told Commercial Observer earlier this year when asked whether he’d ever want to start one. “I don’t want to have to fit these deals into a box. We might have a $1.8 million deal or a $108 million deal.”
“These deals” have turned his 3-year-old firm into a heralded, but rather inconspicuous, private equity real estate shop deploying what sources told CO is a “clean playbook of perfect execution” on off-market, distressed CMBS real estate opportunities across the country.
In the years since its first deal in the summer of 2016 — the purchase of the 3Y Building, an office tower just north of downtown Kansas City — Somera Road has sourced and executed on 66 distressed deals at a valuation of over $1.5 billion across 49 markets and nearly half of the continental United States.
Ross started the company out of his Manhattan apartment in the summer of 2016 and has since grown the team to 15 professionals, who punch above their weight and successfully execute and asset-manage across the firm’s unbelievably large footprint.
“Oh boy, do they know how to work a deal,” the managing partner of a global hedge fund exasperatedly told CO, on the condition of anonymity because the manager is in the process of raising a new fund.
Ross, a former financier, doesn’t take himself too seriously, which is somewhat of an antithesis to the way he runs his business. He’s a 33-year-old commercial real estate “junkie” from Los Angeles, who said he’s only as good as the sum of the parts of his company — he works within a climate of “radical transparency.”
“The amount of deals that he’s closed, executed — in terms of the business plan — sold, stabilized and refinanced, it’s nothing short of a miracle in the world we live in,” Tim Dunn, the chairman of Kansas City-based JE Dunn Construction, told CO. Dunn said they’ve worked on around 15 deals with Somera, including its first, the 3Y Building.
While Somera is headquartered in New York, you’ll find their footprint in places like Allentown, Pa.; Athens, Ga.; Huntsville, Ala.; Tulsa, Okla.; Memphis and Cleveland. Some of the firm’s most high-profile deals to date have been in Memphis, Kansas City, St. Louis and Pittsburgh.
The walls of Somera’s office at 130 West 42nd Street in the belly of Times Square are adorned with mementos and sports memorabilia his team has collected from their work in the secondary and tertiary markets where they target distressed real estate. In his conference room are framed news clippings from Memphis, Tenn.’s The Commercial Appeal that show him shaking hands with local and state officials as well as FedEx Logistics executives after sealing arguably his most high-profile deal to date: a lease with Memphis-based global enterprise FedEx Logistics at the Gibson Guitar Building, a former guitar manufacturing facility located a block south of Downtown Memphis. FedEx Logistics CEO Richard Smith is planning an adaptive reuse of the property into an office hub to serve as the global headquarters for the company, which decided to move to the area to attract young talent and help spur a revitalization of the city’s downtown.
Next to the framed Commercial Appeal news clips is a Gibson guitar that Ross was gifted by his team following the closing of the FedEx deal. Ross had gifted Smith the same guitar, donning FedEx purple and orange, at the ribbon cutting in February; it was the last one manufactured at the location.
Somera (Ross named his company after the road on which he grew up in Los Angeles) has perfected a strategy of finding distressed assets in special servicing via commercial mortgage-backed securities (CMBS) trusts. It trades in distressed CMBS credit, buying and using the rights of the controlling bondholder to pull out and work out deals. They buy, execute, stabilize, monetize and repeat, aiming at smaller deals that are typically bypassed by larger institutional firms.
“His approach to how he finds assets and the ways he’s gone about doing it has been a very overlooked strategy by most,” said Matthew Philip, the head of commercial lending at Bayview Asset Management. “Going into CMBS trusts, looking for things from special servicers and really understanding what’s going on in those legacy deals, is textbook. [They] find where the distress is and take advantage of the opportunity, while being smart about what’s presented to [them]. To some extent, the complexity of pulling assets out of the trust, seeing that the distress isn’t always related to the specific asset but to the structure that’s behind it, is the genius in the approach. I don’t think a lot of developers have seen that opportunity that exists, especially with the smaller assets.”
Ross seemingly amazes those who transact with him. He has found a happy medium living under the realm of a major institutional investor but above the fray of a single-family office. He “runs his team hot, with a shock-and-awe approach,” the global hedge fund manager said. “He always beats his base case and is conservative by design.”
The firm has found a sweet spot in being sub-institutional, but Ross and Somera have to make up for that in volume, which they’ve proved is no issue, according to sources who spoke to CO.
The global hedge fund manager, who’s invested in a handful of Somera’s deals in the last year or so, said, “[Ross] knows that if he goes above a $20 or $30 million equity check, he’s up against a Blackstone, and things get ugly quickly … a $5 or $10 million check size on his management fee [nets them] probably [$500,000] or a million bucks a year. It’s nothing, but he’s just doing so many of them. It’s hard to compete with him. You have to be able to get messy with him on $5 [million] to $20 million deals. For a lot of people, it’s just not worth it. For him, it’s because he is trying to compound at very high rates of return, not collect a management fee.”
Somera works unbelievably fast in all aspects of its business and has on numerous occasions found a buyer for a project before even closing on its purchase. Out of the deals he’s done, “[many of them] never even made it to market, because he had already done what he had to do before he equitized them; that’s the speed this guy works at. It’s crazy,” the hedge fund manager said. “He’s sourced extremely well.”
Ross frequently challenges his newest or youngest employees by giving them free reign to run transactions — sometimes overseeing entire regions of the country — just to instill a level of trust and to see how they react to executing his firm’s playbook. That strategy hasn’t always panned out for the younger, less experienced employees, some of whom have felt overwhelmed and even left the firm. But Ross doesn’t care; where some failed, many have succeeded, becoming key members of his team. (Somera was named as one of Inc. Magazine’s Best Workplaces 2019.)
“His guys hustle,” said the global hedge fund manager. “They won’t last in his culture very long if they don’t move at a very fast speed.”
The fund manager said that when he was introduced to Ross and Somera just under a year ago, he deployed a diligence team into Ross’ ecosystem and pool of existing investors “to fully understand what he was doing, because quite candidly, he’s such an outlier, I wanted to make sure it was real.”
Ross is a staunch opponent to the idea of overextending his firm, shooting higher or becoming a “fund,” because he considers it a headache and a hindrance to his investment philosophy. He said his team views itself as “disintermediating what is often times an archaic fund model,” and he said becoming a fund “is against everything we are about. We like to stay nimble and flexible, and we want to be able to do deals of any size, asset class, geography or risk profile without them having to fit into a specific box or mandate.”
Per the hedge fund manager who spoke to CO anonymously: “if [Ross] overstretches his [firm], he’ll shatter it … he’s self-aware.”
“Listen, if I had the cojones, I’d have done the same thing,” Bayview’s Philip said. “Once you develop relationships with those servicers and you’ve executed a couple times, they’ll come back to you to sell the assets. You can figure this [method] out if you’ve got a little bit of savvy and an understanding of individual markets. The smaller deals lie under a lot of people’s radars. The [firms] with the big staff don’t want to spend time on all these $3 [million] or $4 million purchases of these defaulted assets, even though you can hit a bunch of home runs with them; they want to deal with the bigger stuff.”
For Ross and his team, basis is everything. In a yield-starved world, he has no qualms with walking away from an attractive investment if he doesn’t feel it meets the parameters of his game plan; he’s done it several times before, to the surprise of some of his investors. “His deal standards are so high,” the global hedge fund manager said, highlighting that Ross aims for a 25 to 30 internal rate of return (IRR). “He’s buying A-grade assets at B- or C-grade prices, hunting in a patch that’s messy — $5 [million] to $20 million deals. His returns in a very short period of time are extraordinary.”
But, getting the idea of Somera’s model across to investors in the company’s early stages wasn’t easy.
“Raising the first $5 million on our first deal is the hardest thing I’ve ever done,” Ross said. “I don’t take that for granted; it was extraordinarily challenging. But, you get the first deal done, and you build from there. We did our first deal in the summer of 2016. We did our second and third deals that November and December. And then I think we did [around] 26 deals in 2017. It was really kind of a snowball effect.”
In December 2017, Ross made his move on Memphis.
That month, Somera purchased guitar manufacturer Gibson’s real estate in Memphis and Nashville for around $32 million. The Memphis location — at 145 Lt. George W. Lee Avenue in the middle of the city’s Downtown — included what is a 150,000-square-foot factory and showroom and a nearby 350-space parking lot, where Ross is planning to develop a separate 350,000-square-foot office building called “The Clipper.” (The project is under development, Ross said, but before they started, he said Somera leased the parking lot to an operator—triple-net—who would run it for use during events and basketball games at the adjacent FedExForum). Ross and his partners explored other uses for the Gibson space, such as retail — for a grocery store — office or even a potential brewery, according to a 2017 letter sent by a legal representative of the investor group to the Center City Revenue Finance Corporation.
A few months later in the spring, Ross was approached by Billy Orgel and his son Benjamin — Memphis natives and community staples — who wanted to get involved, eventually taking a minority stake in the property and injecting Downtown development expertise and much-needed local backing.
Billy Orgel is the CEO and president of Tower Ventures, which develops wireless communications structures, and he sits on the Shelby County School board. His son Benjamin works for Memphis-based Slovis and Associates, a full-service commercial real estate firm; he’s also on the board of the Downtown Memphis Commission. The month that Ross bought the Gibson facility, the Orgels were wrapping up a conversion of the historic 19th century Tennessee Brewery in the city’s South Bluffs neighborhood — located just Southwest of Downtown, overlooking the Mississippi River — into a $42 million, mixed-use complex complete with multifamily rentals, office and retail space and a parking garage.
Around the time the Orgels entered Somera’s Gibson project, the newly formed FedEx Logistics’ CEO, Richard Smith, felt like planting a flag in Downtown Memphis.
“Strategically, it made a lot of sense to me,” said Smith, a Memphis native and son of billionaire FedEx founder Fred Smith. “It was kind of bringing the mountain to Muhammad, so to speak, in terms of where the talent is, so I was very interested in this.”
Smith got in front of the Orgels and learned of Ross.
“[Ross] brought on some people that really were well connected, particularly in the downtown market, which I think was a very, very smart move,” Smith said. “What struck me about Ian, at first, was he’s very young. But, I’ll tell you, he is a very sharp and dynamic businessman for his years. He was extremely passionate about Memphis and about the community. That spoke to me.”
Smith said Ross jumped at the idea to do Class A office space for a corporate headquarters. After some hesitation on the part of Smith to go forward with the plan, they picked it back up in December 2018 and haven’t looked back. The FedEx Logistics lease at the building will begin in April next year, the company has said. FedEx will expand the building from 154,000 square feet to just under 200,000 square feet.
Ross’ persistence and curiosity was bred from a young age.
Growing up, Ross’ parents instilled in him and his two brothers an unyielding ambition and an unwavering will to never stop learning, he said.
Ross’s father is an obstetrician, expert witness and a distinguished professor at UCLA medical school, and his mother is a counterterrorism consultant. His parents moved to Los Angeles from Boston when he was a kid, and he’s the middle brother of his two siblings. He’s married to a fellow entrepreneur: His wife started her own public relations business servicing the fashion industry.
“We use a twin desk at home,” Ross said. “She’s got hustle. I wouldn’t be here or have the motivation that I have without her.”
As an undergraduate, Ross attended Goizueta Business School at Emory University in Atlanta. He got his start in commercial real estate at Morgan Stanley in the summer of 2007, where he focused on originating and securitizing large, floating-rate CMBS loans, moving to an investment banking role at Jefferies & Company in December 2007.
In 2009, he saw an opportunity to join a newly formed family office called Triangle Capital.
“I came on and helped build that team, really, from day one,” Ross said. “It was myself and two senior partners — I was a junior partner and managing director [of acquisitions and asset management]. We built that team from three of us in a broom closet with a Bloomberg terminal into an 18-person operation.”
When Ross joined Triangle, they started focusing on buying distressed legacy CMBS credit at the bottom of the market.
“I always joke that when ‘The Big Short’ ends, we were the first scene of a sequel; we really came in at the bottom and started picking up the pieces,” Ross said. “From 2009 to 2013, there was a real arbitrage opportunity. CMBS is a more commoditized, yield-driven product; it was never supposed to be a credit product, because losses were never supposed to be severe. You have very few bricks-and-sticks guys in the CMBS space, and you had very few guys that understood CMBS in the real estate space, so if you could come in in 2009 and really understand the real estate, but also have access to the street, to buy CMBS CUSIP credit, there was a tremendous operational arbitrage.”
Ross identified his current investment philosophy at Triangle but was somewhat handcuffed by the institutional flavor of the shop. He wanted to asset manage and operate the real estate. (While at Triangle, he started his MBA at the Wharton School at the University of Pennsylvania, finishing it within six months after leaving in 2014.)
“You wouldn’t learn his kind of commercialism at a bank,” the global hedge fund manager said.
While a few of his investors said they were unsure of Somera’s ability to execute the same playbook in a downturn — “distressed assets in distress” — its track record will keep them interested.
“For lack of a better term, they’re shit kickers; they get shit done,” the global hedge fund manager added. “[Ross] is 33 and has the hallmarks of something pretty special. But, he’s just at the starting line.”