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The three executives recently spoke with GlobeSt.com about the partnership, the firm's strategic direction and their view of the market. The first component of that two-part discussion follows.

GlobeSt.com: What is the usual size of the funds you have raised to date?

CISNEROS: Cityview presently operates three funds totaling about $750 million. There is a $250-million fund, a roughly $300-million fund and one of about $150 million, in terms of equity raised. The total value of real estate investments that has been made possible by those funds is about $2 billion and about 7,000 homes across the country.

GlobeSt.com: Are you targeting similar figures for your rental funds? CISNEROS: I would say larger. But it's a function of the recovering economy and the appetite of investors going forward.

GlobeSt.com: Who have typically been your primary investors?

CISNEROS: Our principal investors have been public pension systems that have allocated some capital, usually between 5% and 15%, toward real estate. They've invested in hotels, office buildings, industrial parks and the like, and, in recent years, have been investing in income-producing apartments as well as for-sale housing to become more diversified. We have been the specialized urban for-sale entity to this point. The addition of this team will give us the capacity to offer rental apartments and mixed use.

MARTIN: I'm actually not sure if there's one ideal investor base. It's really looking for investors who share the same philosophies and investment strategies as us--investing in the urban environments--than it is attracting certain types of investors. Public pension funds, for instance, is a good category. A lot of their constituents are city dwellers--public employees such as police and firefighters--so those kinds of funds understand the urban environment. Other examples are international investors who identify more with New York and Los Angeles than, say, Des Moines. The major metro coastal cities are the obvious places for us, and therefore international investors could be a good fit. So are corporate investors. Corporate pension funds tend to understand the cities better than others.

GlobeSt.com: With this new venture, are you hoping to sign up repeat investors? CISNEROS: Yes, but we're also looking for new investors. We've started introducing the new team to investors across the country--public pension funds as well as corporate retirement systems, insurance companies, endowment, universities, foundations and high-net worth individuals. So over time, we will have a range of funds with different product types and that meet the needs of different classes of investors.

WAGMAN: In addition to expanding our institutional capital relationships, we're also hoping to deepen them. Within the pool of existing investors, there is a marked trend in trying to narrow down the number of advisors they're doing business with. GlobeSt.com: Are there any specific areas you're focusing on geographically? CISNEROS: CityView began in the California region. In fact, our first investor was the California Public Employees Retirement System. In about 2005, we expanded the platform nationally, and we do business in 12 states and about 45 communities. We currently have offices in Los Angeles and San Antonio, and expect to have a base in New York within the next year.

WAGMAN: I ran a national REIT, so I have a lot of experience with municipal officials and the development communities across the country.

MARTIN: We're in all the obvious places--New York, Boston, Washington, DC on the East Coast and Los Angeles, San Francisco, Seattle and Portland on the West Coast. We're also looking at opportunities in Chicago, Dallas, and other major markets in the center of the country. There are parts of the country we're careful about, such as Las Vegas and South Florida, which are a bit messy right now due to the condominium crisis.

When you invest in urban markets, the difficulty tends to come on the front end--acquiring the land, getting approvals to build a project and so on. Generally, signing tenants and keeping it leased is less of a problem. In a suburban model, it's just the opposite. It tends to be easier to acquire the site and get your approvals, but it's harder to get it leased up and keep it occupied. The question becomes, where do you want to do your battle—the front end or the back end? Because it's so difficult to acquire and entitle and build in the urban markets, they feel less pain than the suburbs when things shift. They're the last markets to go down and the first markets to come back.

GlobeSt.com: Going forward, will your efforts be spread equally among all the property sectors you operate in? CISNEROS: We will continue to focus on the for-sale workforce space because that is our concentration, but rental will be a very important component. In due course, I think it will be of equal strength to the 7,000 for-sale homes we've already been responsible for building. Mixed-use opportunities will be virtually inseparable from the for-sale and rental housing. That's just the nature of the way cities are developing these days and the preferred mix all over the country.

GlobeSt.com: What kinds of return objectives are you targeting? CISNEROS: Our targets from the pension systems we deal with are in the mid- to high-teens, and we have tried very hard to meet those objectives. While that's tough this market, those are the parameters we work with.

GlobeSt.com: You've discussed how the various funds within CityView operate. Are there any new models you're considering, such as joint ventures? MARTIN: The two predominant models today are commingled funds and separate accounts, and the emphasis shifts depending on which part of the cycle you're in. Two or three years ago, commingled funds were the standard, where you'd have a large fund and many different investors in the fund. What happened in the last cycle is many of the investors learned that in the commingled funds, you had less control and less ability to influence the fund's investments. Today, it's shifted back primarily to separate accounts, where an investor would say, "I'll invest with you, but I want to be the only investor in that fund and have some say as to what's done with the capital." We do continue to do both separate accounts and some commingled funds, and we intend to do both in the future. But for the short term, we'll see more separate accounts than commingled funds.

GlobeSt.com: What are some things you're working on right now, or are starting to work on? What can we expect to see from CityView this year and next?

WAGMAN: I'll give you a couple of examples of the things we're looking at in the urban mixed-use space. We've identified opportunities for mixed-use projects that focus on student housing. Two of those projects are here in Los Angeles and we're looking at several others right now. Mainly, it's retail and office with market-apartments on top geared toward students. They're very similar to the other things we've been developing. We're also sourcing development partners to do a similar thing. We're evaluating a project in Austin, TX. Our focus is on raising money around an apartment strategy that we put a high priority on, that's consistent with all of the goals that CityView believes deeply in.

CISNEROS: We have been active throughout this downturn, both in projects that we previously committed to and therefore had been selling through this period. Anecdotally, our experience at CityView in recent months has been very heartening, as we have seen good sales numbers. We've had double-digits coming out of specific projects in repeat weeks through June, July and August, so we've been selling at our existing sites at an accelerated pace. Additionally, we've been looking at new projects over this period, particularly in Southern California, and we're looking at projections for longer-run projects with David and Lee.

We've been active during this period, though it's fair to say that, like everyone else, we've slowed down and we're much more deliberate. We haven't put out as much capital during this time, but we have been active and new projects are coming on line in this period.

Instant Insights /

CityView's Cisneros, Wagman and Martin

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