GlobeSt.com: What's the thinking behind the shift away from private equity? It's plentiful enough, no?

Denholtz: The problem we've had is that, while there's a lot of private equity out there, we've developed a company infrastructure that just can't be supported by private equity capital. It's not quick enough. We have specific experience with Rothschild, and what they do is invest solely in private companies looking to go to the next level with quicker, more efficient and smarter capital. But we're not closed out from doing private equity deals. We'll certainly enter into a number of joint ventures with private capital.

GlobeSt.com: What's the specific relationship with Rothschild? It's not a merger.

Denholtz: It's neither a merger nor an acquisition, but rather a combination of capital, and neither of us is giving up our own identity. We've transferred ownership of the management company to the new entity. We'll close the deal in phases and at the end of the day we'll both be stockholders in the same company. They'll have an investment of $125 million, and we'll invest $55 million of our own partnership interest, using that base of $180 million to spend the next few years acquiring valued-added and core-plus properties.

GlobeSt.com: Will anything of Denholtz Associates exist separate of the new entity?

Denholtz: There are a few assets with my ownership interest and that of my family--some interests in some apartment buildings--that are not going in, but that's only because they don't fit strategically with what the partnership is trying to do. Other than that, by and large, it's all going to be one entity with one streamlined balance sheet and a really powerful platform.

GlobeSt.com: Does the nature of your acquisitions change?

Denholtz: A little bit. It's probably unprofitable for us to go after some of the smaller assets we might have pursued. I think most of our deals will be in the $25-million-to-$50-million range rather than $10 million to $20 million.

GlobeSt.com: Aren't there a ton of competitors in that range?

Denholtz: There's a ton of competitors in every range. The thing that makes it exciting is that the capital is very efficiently priced and, more important, our partners are involved in our business and up to date on what's happening. If there's a closing in two or three days it will close in two or three days.

GlobeSt.com: But who drives the deals?

Denholtz: Me. For instance, when we closed on the first phase of the agreement in December, we already had two pieces of property under contract. And, because of the capital structure, we closed all cash. That kind of power in today's marketplace is of real value.

GlobeSt.com: What will it do to your portfolio?

Denholtz: First, we'll concentrate on slightly larger assets. Second, my philosophy was solely value-added opportunistic, extremely high-yielding assets that were out there on the risk scale. We'll still do that, but there's much more of an opportunity to get some core-plus returns. Fundamentally, we don't want to change what we do best, which is to add value to real estate. We won't venture too far from that, but with this much capital it's tough to find that many opportunistic plays.

GlobeSt.com: So, the portfolio . . . ?

Denholtz: We should be able to acquire well over $100 million a year in new acquisitions for the next few years.

GlobeSt.com: And the total?

Denholtz: In a good case, $1 billion is a nice target number for total holdings.

Instant Insights /

Denholtz Holdings' Steve Denholtz

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