Charlie Garcia is the trusted advisor for a select and growing number of extraordinarily wealthy real estate investors.
After transitioning from a multimillion-dollar construction and cement company, Garcia established his own family office,
C. Garcia & Associates in Indianapolis, and opened its doors to a small number of significant investors.
Prince: You owned and ran a large-scale construction company and you opted to leave. Why?
Garcia: For 25 years, I owned and grew a construction company, which later included a cement company. Being the CEO and president of any company with over 300 employees can be very wearisome. On top of dealing with all the day-to-day issues—issues that never abated—I was the person bringing in most of the new business. Because of my extensive network of contacts and nuts-to-bolts knowledge of the construction business, I usually brought in the larger deals. Also, when it came to these larger projects, I was very hands-on. I made sure everything went as smooth as possible, and I personally handled any and all the problems as they arose.
A few years ago, I had the opportunity to hand off the company, so I took it and set up my own family office. With the workload off my shoulders I thought I would take it easy in a sort of semi-retirement. I thought I’d use my own money and do some local real estate development projects. I’m not sure how long that lasted, probably a little more than a week or two.
Some of the very wealthy investors I’ve worked with over the years approached me about co-investing and helping them with some of the development deals they were either presently involved in or were considering. It sounded a whole lot more fun than sitting around, so I created C. Garcia & Associates Inc. It’s a combination commercial real estate developer and advisory firm.
Prince: Who are your clients?
Garcia: I tend to look at my business as having two types of clients. There are the investors and there are the construction companies.
Prince: Can you describe the investors?
Garcia: On the development side of the business, the clients range from institutions that have formed corporate syndicates to the very wealthy. The institutions are primarily banks and insurance companies. When it comes to the syndicates, it’s all about tax-credit deals. A syndicate might raise tens to hundreds of millions of dollars and invest across a number of low-income housing projects. Add some bank leverage in the form of loans, and the returns for these projects are in the 8% to 15% range. Meanwhile, the tax credits are great ways for the corporate investors to lower their taxes. For some of them, such as banks, it’s also a great way to address their community investment requirements.
The real fun and growth of my business is with the wealthy, especially the very wealthy. I’m seeing more and more really wealthy individuals, including some billionaires, interested in different types of commercial real estate projects. Some of these high-net-worth investors are interested in creating ongoing cash flows, which means building and renting out properties. Other wealthy investors are looking to build and sell with no involvement in management. It all has to do with their other investments, often the state of their ongoing businesses, and what they feel comfortable with.
Personally or through their family offices—a lot of the high-net-worth investors I talk to have family offices—I’m seeing the very wealthy interested in having some of their money working for them in commercial real estate projects. While the investment professionals they work with might understand real estate investing, I’ve not seen many who know the development process from beginning to end. There are a few, but not many. For example, one family office has a team of analysts that can make spreadsheets dance. Some of the analysts even understand the financial ins and outs for real estate investing. The complication is that they’ve never been in the trenches, and for some deals, having done the contracting, worked with the politicians and knowing the way to connect with the community can make a big difference. That’s my niche.
What’s particularly important when I put together these commercial real estate development projects with wealthy investors is being attuned to the various tax implications. I’m not a tax lawyer or accountant, but I do have a lot of experience with these kinds of projects. Still, if the wealthy investors don’t have their own real estate and personal tax specialists, I make sure that we bring in top tax talent when we put these deals together.
These high-net-worth investors are looking at commercial real estate as part of their asset allocation, but that’s not new. I’m seeing more and more of them moving away from putting their money exclusively into real estate funds and wanting to do their own deals. Also, instead of only buying existing properties, they want to include development projects in their investment mix. The reason for this interest is fairly simple: a higher potential upside. This all works for me because of my experience and track record. Besides, I like to put my own money into these same development deals.
Prince: What about the advisory side of your business?
Garcia: On the advisory side of the business, the clients are a variety of developers and construction companies. After all those years successfully running a major company, I’ve learned a few things that convert into success in the construction business.
I also was involved in developing some new and innovative methodologies. For example, my associates and I at the construction and cement company developed a number of processes resulting in corporate operations becoming more efficient and leaner. The result is significant cost savings to the client coupled with better margins for the construction company. Being able to take these processes and help companies use them is something my former competitors find very appealing.
While I’ve done a few conventional consulting projects, most of the advisory work I do is tied to commercial real estate development projects that carry success fees. So, while I consider them to be “consulting engagements,” they’re usually part development project.
Prince: Of the two sides to your firm, which is the more interesting and which is the one to which you devote more of your time?
Garcia: The commercial real estate development projects and advising to construction companies can be very interesting, and I plan to continue doing both. However, because of my extensive professional and political network throughout the U.S., but especially in the Midwest and Texas, the development projects have the greatest upside potential. While they’re often the most challenging, I’ve always seemed to thrive on challenges.
Prince: How is business?
Garcia: Many developers and construction companies are still feeling the pain of the recent recession. Throughout much of the country, real estate development hasn’t bounced back, and there aren’t many signs it’s going to bounce back in the near future.
Having pointed out the overall state of affairs, in my situation, business is booming. I have more exceedingly attractive opportunities coming my way than I can possibly handle. I mentioned I toyed with the idea of semi-retirement, where I would only work on local projects I was backing 100%. It turns out that semi-retirement was not for me. Since I officially opened up my new firm and let the word out about what I would be doing, I get new calls regularly from potential advisory clients. I’m also getting an increasing number of calls from potential investors looking for advice on projects they’re either involved with or are considering, along with interest in co-investment opportunities.
Prince: Are there any other real-estate-oriented projects you’re involved with?
Garcia: In my mind, there’s no question that high-quality education is essential for young people to succeed today. Take it a step further: The future of our country is dependent on these people. I strongly believe the answer to the education problems facing the country today is charter schools. I’m really quite passionate about charter schools.
I’m on the board of two award-winning charter schools. Based on my experiences, with the assistance of other dedicated supporters, we’ve developed and continually refine a very flexible and customizable program of best practices that we’re committed to sharing.
When it comes to development projects, I’m working closely with a very wealthy family to establish a $150 million fund that will help finance building more than 100 charter schools throughout the U.S. The wealthy family will be putting in about half the money and there are a number of billionaires who have expressed interest. The fund is conservatively projected to have a return in the 8% to 15% range. Not only is the fund probably going to be highly profitable, but also the result—all the charter schools—will make a significant difference for the future of our country.
