Tony Thompson

GlobeSt.com: It's been an interesting year, no?

Thompson: I love 2008. It's been interesting and will be more so. Even though the stock market is reflecting some buoyancy and earnings aren't as bad as everyone thought, we still have a ways to go in the debt market to de-leverage some of the significant run-up in values. So there's a shortage of commercial debt right now, and it will be interesting to see what kind of bumps in the road occur when a significant amount of commercial debt has to be refinanced, particularly throughout '09. There will be shortfall in the ability to refinance, and that gap is where the opportunity is for people with cash and expertise.

GlobeSt.com: Hence Thompson National?

Thompson: Yes sir.

GlobeSt.com: What's the mission, and how do you bridge that gap?

Thompson: Amateur hour is over. It was easy to make money in commercial real estate from 2003 'til 2006, and now with the economy slowing and the debt crisis, you really have to understand how to operate real estate. Investors who want to asset-allocate--whether they're large pension funds or foreign investors who are taking advantage of the currency arbitrage--are looking for experienced, qualified operators to help them invest their funds appropriately and take advantage of those opportunities. So we're building a team of people who have worked with me, either at Triple Net or Grubb or elsewhere, and we'll have a number of offices nationwide. These people are experienced in operating real estate, and the opportunities will avail themselves because of the relationships we have built. Cash and finance are important, but off-market transactions happen because of those relationships.

GlobeSt.com: Define value-add, please, and give me a sense of the geographies you're targeting.

Thompson: In terms of geographies, we're targeting the top 25 MSAs, where jobs and populations are still growing. Value-add, or opportunistic or vulture investing, all fall into the same category, where there's vacancy created by subprime lenders who have gone out of business or the downsizing of the financial services industry or hedge funds that were on the wrong side of commodity or debt plays.

GlobeSt.com: Given the market, how do you play debt and equity and do it smart?

Thompson: It's an excellent question, and there's a school of thought that debt is a more risk-adjusted area to be in than equity, but it's an overreaction. There's opportunity in both debt and equity. It just depends on what's coming your way at a particular time, and there's opportunity to make high teens and low 20% IRRs in each. We're looking at both.

GlobeSt.com: Market aside, do you see any 1031 plays in your future or are you limited by non-competes?

Thompson: The 1031 tenant-in-common space got very crowded, even though Triple Net/Grubb continued to be the dominate player in that. At the tail end, new sponsors were coming in weekly, it seemed. But 2007 volume was down roughly 35% or 40% over 2006. And 2008 is off to a substantial slowdown over 2007, so a number of TIC operators are having difficulty maintaining their investor relations, asset management and accounting staff.

We don't have any plans in the near future to offer TIC products simply because it's not a business that merits the kind of investment we made at Triple Net and Grubb. We've been approached by a number of TIC investors who have been with sponsors who couldn't provide the service they once could and are asking us to become their asset manager, so indirectly I am in the TIC business.

GlobeSt.com: To what extent was the merger an exit strategy for you?

Thompson: When we started Triple Net 10 years ago, we capitalized it with $3.6 million in equity from friends, employees, investors and ourselves. When we did the reverse merger with Grubb, that $3.6 million had grown to nearly $300 million in equity. So we had built a sizeable company. So it was an exit that worked out well for both our equity investors and the investors in our programs because it provided a company whose performance, because of corporate governance, is much easier to evaluate.

GlobeSt.com: But I meant you personally.

Thompson: It did create a liquidity event for us personally. We're the second largest shareholder of Grubb & Ellis stock and their biggest cheerleader.

GlobeSt.com: So why couldn't you stay on?

Thompson: The opportunities were so compelling to me in areas we weren't focused on and didn't have the mission statement for. All our products were very stable income-producing assets, and there was no mechanism as chairman of the board of Grubb and Ellis to do any investing that wasn't within our focus. To sit on the sidelines, and miss what I thought was a once-in-a-lifetime opportunity to invest in troubled real estate, was like being a sprinter waiting at the starting block. So I finally grabbed the starter's gun and shot it off myself.

GlobeSt.com: You've said, "Buy into fear and sell into greed." It's not the warmest and fuzziest of quotes. How does it fit into your philosophy?

Thompson: On behalf of investors, we sold over a $1.8 billion of real estate into a very strong market in 2006 and 2007. And there were a lot of people trying to get into the game. There's so much fear on the part of investors and having seen four recessions I felt there was so much opportunity. People were pulling back dramatically because credit was too easy to get before and it's too hard to get now. There's so much of a gap between reality and perception that someone like myself just had to get in there and take advantage of it. For disciplined investors, that phrase has been proven true over every cycle. You just need to know when to get out. Fear is unwarranted today, but it creates tremendous opportunities for our co-investors and we're happy to take advantage of it.