by VIVIAN MARINO
– October 9, 2012 –
Mr. Cogsville, 47, is chief executive of the Cogsville Group, a private equity firm that last week won a bid to buy foreclosed homes through a Fannie Mae pilot program. Before starting his company five years ago, Mr. Cogsville was a lawyer at Skadden, Arps and an investment banker at Merrill Lynch.
Interview conducted and condensed by
Q. Tell me about your successful bid in the Fannie Mae program.
A. In this particular sale we looked primarily in the Illinois marketplace. We bought a portfolio of homes — 94 — in the Chicago area. They’re all single-family. Some are condos and in multifamily structures and some are single-family detached homes; some are in the South Side and some are fully in the suburbs. So it really spans and gives you a nice diversity in that marketplace.
Q. That’s also a lot of property to oversee.
A. We partner with the best in breed there locally. We have several management companies and a national management company. The idea is to go in and stabilize, then fix up the properties and make sure they’re in habitable conditions — that’s the best way to stabilize a community.
Q. How much of your business is tied to the government?
A. Well, right now a fair amount. From the very beginning our strategy has been that the government is going to be somewhat monolithic in its ability to actually be at the epicenter of the problem, and so our ability to partner with the federal government was part of the acheter viagra strategy. We partnered with the F.D.I.C. and we now pivot over to Fannie and Freddie, where the residential crisis is happening in more of an acute way, and HUD and F.H.A.
Q. Do you sometimes work directly with the banks?
A. Increasingly we’re now going in a proactive way to private banks to talk to them about resolving their own loans so they can clean their own balance sheets and start to become healthy as an active lending bank again.
Q. So most of your portfolio is made up of real estate debt.
A. Right. The country is in a deleveraging phase and that’s really where the opportunity is for firms like ours to get in below replacement costs. I think that won’t always be the case, but in this particular moment in time I think that is the acute opportunity. We’ve bought over $3 billion in unpaid principal balance in about 4,000 loans in 49 states. A lot of our strategy includes buying the debt and frankly modifying the loans. So, really, a lot of the 4,000 loans that we’ve acquired were about modifying or figuring out ways to keep these businesses in place.
Q. But you do sometimes end up owning the real estate, as you say, well below replacement costs.
A. Probably less than 20 percent of the time, and in those cases we have value-add local partners that help us.
Q. How much of your portfolio is New York-based?
A. Very little of it. Many of these are big bulk sales. They’re in receivership with banks, whether it’s one bank or a multitude of banks, and a lot of the banks that we’ve been actually buying assets from or loans from have been in other regions.
Q. There’s less distress in New York.
A. New York is such a unique market, as you know. The jobs and some of the fundamentals are still more or less here. A lot of capital has flooded to New York.
I think where there is an opportunity in New York is in the overleveraged properties, particularly in the multifamily class.
Q. Where do you see your company in, say, the next 10 years?
A. At 10 years we’ll be beyond this distress. We’ve now started to think about what we will do when things start to normalize.
The idea is for it to be a very mature institutional firm and looking at core real estate, which we do now; it just happens to be in a different way.
Q. Did your father Donald J. Cogsville’s involvement in the Harlem Urban Development Corporation years ago influence your decision to get into real estate?
A. Of course. I was seeing some of the deeply urban issues in America back in the mid-’70s.
Harlem is such a real community and the kids love it. Watching it evolve is an experience.
Q. You once played professional soccer in the Major Indoor Soccer League. Do you still play?
A. After six knee surgeries and an Achilles’ tendon rupture, I hung the cleats up for good 20 years ago. But what I do is help FC Harlem, and help to bring soccer into the urban communities.