FEATURE ARTICLE, JULY 2008

GLOBAL CAPITAL INVESTED AT THE LOCAL LEVEL
This owner/operator focuses on market knowledge and uses its local offices to invest money from around the world.
Jaime Lackey

Boston-based Taurus Investment Holdings has purchased and sold more than 20 million square feet of office, retail, industrial, multifamily and hotel space worldwide. On a cost basis, Taurus invested $800 million worldwide during 2007. In the U.S., the company’s investments totaled approximately $540 million. The company expects to invest approximately $1 billion worldwide each year for the next 5 years.

Over the long-term, the company will make approximately one-third of its investments in the United States, one-third in Western Europe, and one-third in emerging markets such as Turkey, Peru, Argentina and Central Europe.

The company was founded in 1976 in Munich, Germany. It began investing in U.S. projects in 1979, when it established an office in Pompano Beach, Florida. At the time, it was strictly funded by German capital. In 2001, the company began working with U.S. capital, and it also invests capital from the Middle East and Europe. Since the company began auditing its numbers in 1997, it has created 20 percent returns for its investors.

“We combine global capital access with global deal flow, managed at a very local level,” says Peter Merrigan, president and CEO, who is based in Boston.

Taurus invests through its local office network. Taurus’ U.S. offices are located in Atlanta; Boston; Chicago; Dallas; Los Angeles; New York City; Denver; Jacksonville, Orlando and Deerfield Beach, Florida. The company has 20 operating entities worldwide; 14 are in the U.S. “We won’t invest where we don’t have an on-ground presence,” Merrigan says.

According to Merrigan, many U.S. markets continue to be attractive, despite the current credit crunch. He calls New York City “solid,” and says Taurus will continue to acquire properties in the city. He expects Boston to maintain strength in the commercial real estate sector. (The company purchased 21 buildings in the center of Boston in the past year.) Though the housing markets are down now, Florida is a “good bet in the long run” due to its continued population growth. He predicts Colorado will continue to grow, especially on the western slope of the Rockies, and he notes that Atlanta is a good market, as well.

The company is heavily invested in Texas, particularly in Austin. Merrigan notes that Texas is having short-term problems, like most markets, but that the company views the state as having positive potential in the long run. In fact, Taurus of Texas Holdings LP purchased Whisper Valley Ranch, totaling 1,965 acres, in east Austin in 2006. Taurus is master-planning the mixed-use development planned for the site, which will contain retail and office space as well as more than 7,000 homes in a mixture of single-family, townhome and apartment residences.

The company is not currently active in San Francisco or Seattle, and its only investments in Washington, D.C., have been through a joint venture. But Merrigan says these markets hold potential for local Taurus offices and subsequent investments.

Taurus rarely does joint venture projects. According to Lorenz Reibling, chairman and senior partner, the company “is not a fund handing out money. We control the projects. We are responsible for each project from A to Z.”

Merrigan explains, “At the end of the day, our investors trust Taurus. If things go right, great. If they go wrong, they expect us to fix the problem. With joint ventures, it can be hard. We need the proper alignment of interests, so we invest in our own projects and manage them from start to finish.”

Diversification is key to the company’s success. Merrigan notes that the diversification of product type, capital and currencies insulates the company from market and currency fluctuations. For example, if the dollar is strong, Europeans might be hesitant to invest in the U.S., so access to different currencies is critical.

According to Merrigan, the current down economic conditions in the U.S. “affect macro perspectives, but they have not affected day-to-day operations for us. We’ve never been a high-leverage player.”

He adds, “Inevitably, it impacts the valuation of property. The cost of capitalizing has gone up. We need more equity, which is more expensive and expects higher returns. How long it will last remains to be seen: will it be sorted out this year or will it take a couple of years?”

In addition to working with diverse currencies to invest in value-added deals in diverse markets, Taurus has also started a new group focused on single-tenant sale-leasebacks and net lease properties. “The capital we deal with is interested in fixed-income as well as the value-added deals we typically do,” Merrigan says.

The people and the processes also make Taurus a success.

The company hires people with a very high level of education and professional experience. “We have deep intellectual capital,” Reibling says, noting that many senior executives come from highly regarded schools, like the Massachusetts Institute of Technology.

Most senior level employees have 10 to 15 years of experience in the industry, and many have graduate degrees.

“Our people give us an edge,” Merrigan says. “Our hires are very smart, energetic people with an entrepreneurial spirit that have the creativity to put deals together and manage them.”

Reibling also notes that the company’s procedures, due diligence and underwriting are highly standardized. Every entity operates in the same way, which makes it easy for investors to invest with them in different areas of the world. Reibling explains, “There is no learning curve for institutions or high net worth individuals who want to invest in different areas. Additionally we have total transparency in operating and reporting systems.”

Merrigan says, “Whether someone invests with us in Turkey or Boston, the process is the same and most documents are the same. We feel this helps to develop a level of trust.”

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