LOS ANGELES—AECOM Capital, an affiliate of L.A.-based AECOM, launched in January 2013 with a vision to fund real estate development opportunities using a fund model. In a year and a half, the new investment company has committed $100 million of capital and launched six development projects worth $2.3 billion. Among those projects, four are located in Southern California, including the now famous project on six acres in Downtown Los Angeles’ South Park neighborhood. Although AECOM Capital has had some major success this year, few know about the still-new company and its innovative investment model. So, we sat down with the man behind the model and the investment decisions, AECOM Capital CEO, John Livingston.
GlobeSt.com: How did AECOM Capital come together?
John Livingston: I come out of Tishman Realty & Construction. I was with that company for 20 years. We sold the construction company to AECOM four years ago, and I spent some time traveling around the globe to create a global construction platform. About 18 months ago, I went to my CEO and the board to suggest that we create a real estate platform because we had such tremendous resources in house, both design and construction from Tishman, and with capital and a balance sheet we could create a real estate platform in a fund model. I put together a business plan and said why don’t you commit $150 million to me and I’ll put up a small share of that, and we’ll be joint venture partners to invest in real estate projects. In doing so, we both control our destiny more and we will get yield over time on our investments and we will also get short-term service revenue.
GlobeSt.com: What is AECOM Capital’s Vision?
Livingston: We wanted a fund structure. The vision is to create a series of funds in the $150 million to $300 million range. We have committed about $100 million of the $150 million so far in six projects: two in the New York area and four in Southern California. We source deals through personal relationships and through Tishman Construction.
GlobeSt.com: How has a background in development been beneficial to your work with AECOM Capital?
Livingston: My background is in development, construction and finance. A lot of times with funds, they are more capital allocators and real estate is one of their disciplines. We are the opposite. We are real estate professionals that picked a fund platform to invest in real estate. My entire career has been in development and finance. With Tishman, I developed the Westin Time Square Hotel, which is 863 rooms, and prior to that I developed a million square foot office building in Downtown Manhattan for the GSA. At Tishman, in terms of the construction company, we put in place $3 or $4 billion per year over my eight years there. That is $30 billion in construction projects where I got to understand in a very thoughtful way not just how buildings get built, but how construction companies operate, and how best to avoid risk and take risk within that space. We come in at the co-development level and we are active partners, although, the local partner on the team is the day-to-day acting partner. But, we put a person on the team, we attend meetings and we think we help put value over time with our partners.
GlobeSt.com: Your career didn’t start on the construction side. Can you talk a little bit about your career path?
Livingston: I have a master’s degree in city planning from Harvard and I went from there right into the real estate business. I was a lender early on in my career where I learned how to underwrite real estate throughout the country, and then I was an acquirer of income producing real estate for a number of years for a foreign investor. Then I worked for Mayor Edward Koch for the New York City public development corporation, which did the real estate deals on behalf of the city. Before joining Tishman, I was a partner in a company called Lcore, which was an East Coast based real estate company that comes out of Trammel Crow. So over my career, I have had experience in just about every aspect of real estate, from development, finance, marketing, leasing and sales.
GlobeSt.com: What characteristics do you look for in a development project?
Livingston: In a perfect world, you want to do simple deals because development deals are so complicated, so less is more in that respect. This modern era and today’s modern client demands mixed-use, so we combine office, retail and residential often times. It is more exciting and more dynamic, and it is what people want in an urban setting. Of course, like everything else, location is paramount as is proximity to public transportation. So, you start there and then you move on to land basis. You never want to overpay for land because that is your admission ticket into a deal. You know what the market rents are; you know what the cost of construction is; you know what financing is; the wild card is the cost of land. If you pay too much going in, you are going to have a much tougher experience. Finally, I look for dynamic environments. I am an urbanist, so I look for urban environments. It is just more comfortable for me, and I understand it better. In my opinion, you want to be transforming neighborhoods. For example, I was very involved in the redevelopment of 42nd Street in New York when it was a really terrible area. I worked with the city to condemn the whole property and then I switched to the development side and bid to build a hotel there that helped to rejuvenate the area.
GlobeSt.com: What are some of the Southern California markets you are targeting?
Livingston: I am not as particular about the submarket because Los Angeles is so huge. I like improving locations, so that does make some parts of L.A. very interesting. Culver City has all of the attributes: it is not too far from the beach; it is off the new EXPO line; entertainment studios have an employment base there. Things are changing there, so there is a huge demand for space. Historically, that has been a slower growth area because the city has been challenging about letting developers come and develop there. Now, there is a pent up demand.
GlobeSt.com: Does AECOM Capital hope to pursue projects in the middle part of the country or internationally?
Livingston: Initially, we have been following the markets where Tishman, our construction affiliate, has a significant presence, and that is Boston to Miami, Chicago and San Diego to Seattle. There is also tremendous growth and opportunities in Dallas, Houston and Denver. As a global company, my vision is to create a series of smallish funds that are focused on either geography or business. We are looking in London, and we hope to expand to other gateway global cities. But, we are starting with what we know best, which is the US.
GlobeSt.com: Last thoughts?
Livingston: In total, the six projects that we have committed capital to is about $2.3 billion worth of total development, if you include the second and third phases, and about 6 million square feet of space. I think it is pretty substantial for 18 months of work with a fairly lean team. We are anxious to grow our platform and to bring in third party capital.