Providing Real Estate Investments

An interview with Susan L. Stupin, Managing Director, The Prescott Group, LLC, New York

(Leaders)

April 20, 2007 - Editorsí Note Susan Stupin graduated cum laude from Princeton University and has an M.B.A. from Harvard University. She began her career in capital markets at Paine Webber and worked in the Institutional Finance Group at Eastdil Realty, Inc., before joining Goldman Sachs, where she became a Vice President in the Investment Banking Divisionís real estate department. In 1988, Stupin left Goldman to co-found The Prescott Group, where she is a member of the Management Committee and Investment Committee in addition to her role as Managing Director.

Company Brief The Prescott Groupís primary functional entities are Prescott Capital Management, LLC, and Prescott Capital Advisors, LLC. Prescott Capital Management is the firmís investment and asset management affiliate, bringing institutional quality real estate investments to high-net-worth individuals, families, trusts, foundations, and other private investment groups. It sponsors a series of real estate investment vehicles comprised of commercial properties located throughout the United States; manages investment funds targeted toward specific strategies and segments of the property markets; and originates and manages separate account investment programs focused on the United States and international property markets. Prescott Capital Advisors is the firmís investment banking and financial advisory affiliate. Senior principals at Prescott (www.prescott-group.com) have been instrumental in the acquisition, financing, development, management, and sale of over $10 billion of property assets.

(L) What are The Prescott Groupís range of services, and what is your outlook for growth when you look to the coming year?

(S) Prescott is a real estate merchant-banking firm. We are in the business of providing direct real estate investment opportunities to private clients, as well as financial advisory and investment banking services. Weíve been in the midst of significant growth, spurred primarily by the increasing sophistication and very rapid gains in the private client market. That market is increasingly focusing on alternative assets and asset classes, including hedge funds and private equity, as well as direct real estate investment. There is significant demand for direct institutional-quality real estate investments on a programmatic basis, and we feel that access to those products has been underserved. In response, weíve taken steps to build our team and expand our platform very quickly so that we can become the preferred provider for direct real estate investments to the private client marketplace.

(L) How much money do your private clients have to invest in real estate?

(S) Our target markets include the full spectrum of the wealth pyramid from the ultra-high net worth group, who are people with an excess of $50 million in liquid assets to invest directly into real estate, to the high-net-worth investors with roughly $10 to $50 million to invest. Then you have those investors with about $1 to $5 million to deploy into real estate whom we are serving as well.

(L) Would you describe yours as a global business?

(S) It is certainly a global business. We primarily have made investments inside the U.S., but have been active in Mexico and Canada as well. And we have also explored opportunities in Europe and into off-shore properties where we think we can add value. And our clients are international; we attract wealth from all over the world.

(L) What impact is new technology having on The Prescott Group?

(S) Weíre a very active, very hands-on asset manager as well as owner. So when we see financial information very quickly, we can process it, evaluate it, and understand it more rapidly on behalf of our clients. We also like to report our performance clearly and constantly, and integrate our reporting with our clientís broader investment portfolio. Technology affords us the opportunity to do that, as well as keep track of investments and maintain a current database of our clientís investments and preferences. In terms of our core analysis and underwriting of acquisitions, there are very powerful platforms which enable us to evaluate a number of different sensitivity analyses and different modeling scenarios, which enable us to give more rational thought to the investments we make.

(L) When you look back at your early experiences building this company, is this what you expected?

(S) It has been every bit as challenging, and exciting, as I expected. We have been on a tremendous growth trajectory and we have had the good fortune of having a very clear cut business strategy. Itís easier to enjoy building a company that has a clear vision.

(L) Are there enough opportunities for women in your industry?

(S) There are many talented women working in real estate, but there are also a lot of brilliant lawyers, investment bankers, and investment managers who are women. The opportunities are there, and these days, you also create your own job security and your own opportunities. I think the challenge for women, along with any other young professional, is to realize that you have to manage your own career. You have to take a very active and aggressive role in doing that. You have to make sure that you are working with the people you want to work with, that you have a mix of experiences, and that you are building your intellectual toolkit for your next step. Clearly networking is a very important thing to do. And Iíve been pleased to find how productive a lot of the womenís networking activities can be.

(L) What are the priorities for you as you plan for continued growth in 2007?

(S) Last year we acquired about $500 million of real estate, and we expect to buy $1 to $2 billion this year. So we have specific goals in terms of expanding our assets under management. But we also have a number of broader initiatives. We are working to expand our relationships with wealth managers. As part of that process, weíre continuing to market to, and educate, private clients and their advisors about the part real estate plays in a broader portfolio. We also plan to identify potential strategic partners who might work with us on some of our specific investment initiatives. And in terms of deal sourcing, we continue to find off-market deals. We always work to be creative and to develop opportunities where competing institutional capital may be somewhat less saturated.