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Greg Lemkau, CEO of MSD Partners, discusses real estate and why he likes it in their portfolio.
Key Takeaways
- Real Estate is a unique form of investment in that you can see it and touch it. Hard assets are tangible in a way other assets are not.
- Real estate can provide capital appreciation as well as substantial current income, and can often do so over long time horizons.
- The tax benefits of real estate make it particularly attractive to hold in your portfolio.
Transcript
My name is Gregg Lemkau, I'm CEO of MSD Partners. I joined the firm about a year ago after spending 28 years at Goldman Sachs, where my last job was the head of global investment banking. MSD partners is really two things there's MSD Capital and MSD Partners. MSD Capital was started in 1998 really as the family office of the Dell Family. In 2009 we started MSD Partners, which is a registered investment advisor that allows us to take third-party capital. So today we've actually got MSD Capital, MSD Partners. In aggregate we manage about 23 plus billion dollars of capital 16 or 17 for the Dell family. The rest of it being employees and partners of the firm and outside investors.
I came from a long career at Goldman Sachs, working mostly with companies and less with hard assets in real estate and it's actually been fun for me to get to know that business. You can kind of see it, feel it, touch it, and experience it in action and understanding the leverage in that business when you run these properties really well, and the opportunity that it can come to generate cash flow and generate returns. It's not my favorite investment, but it's probably the most interesting to me over the past year because it's been the newest to me.
We own five, I'd say, marquee properties in the hospitality side. We own the Four Seasons in Maui. We own the Four Seasons on the big island of Hawaii, we own the Fairmont in Santa Monica, California. We just bought and renovated the Boca Raton in Florida and then we just bought the Naples Beach Club in Florida, which we're going to redevelop as a Four Seasons Hotel and a discovery residence, so it'll be really exciting. It's the first time those two organizations have worked together. So we've got, you know, five pretty high-end properties in various stages of development across the portfolio.
I think Maui we've held for 14 years and we've gotten our money out many times over. Internally, we call them "hold forever assets" because we just wanna hold them forever and they generate great cash flow. Although I remember I said that to Michael one time, he said, Well, it's not really a "hold forever" if you want to sell it, if you can get a better deal, feel free to sell it. So we do, you know, we like these assets and have appreciated in value and they're also great cash generators. And again, from an individual investor standpoint, like, like the Dell family from a tax benefit, you know, it's good to have exposure to the real estate class as well.
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