Catalus Capital's Managing Partner, Marek Olszewski, recently appeared on The Deal to discuss the fund's opportunistic real estate investment strategy. Catalus seeks to partner with market leaders in specific segments and geographies where market inefficiencies exist.
Please click here to see the interview.
Friday, November 14, 2014
Tuesday, September 16, 2014
What am I Reading (listening to) Now?
*Update 12/4/14
Zero to One by Peter Thiel
Corner Description: The co-founder of Paypal and early investor in Facebook describes his views on how to build a successful business.
*Update 10/23/14
How Google Works by Eric Schmidt & Jonathan Rosenberg
Corner description: Insights on Google and running a business from two of the company's leaders.
*Original Post 9/16/14
I read a lot, so I figured it might be interesting to keep updates on the latest...
Inside the House of Money, Top Hedge Fund Traders on Profiting in Global Markets by Steven Drobny
Corner description: interviews of successful global macro traders on their strategies and experiences.
Zero to One by Peter Thiel
Corner Description: The co-founder of Paypal and early investor in Facebook describes his views on how to build a successful business.
*Update 10/23/14
How Google Works by Eric Schmidt & Jonathan Rosenberg
Corner description: Insights on Google and running a business from two of the company's leaders.
*Original Post 9/16/14
I read a lot, so I figured it might be interesting to keep updates on the latest...
Inside the House of Money, Top Hedge Fund Traders on Profiting in Global Markets by Steven Drobny
Corner description: interviews of successful global macro traders on their strategies and experiences.
Friday, September 5, 2014
On The Left Interview - Swimming Naked
Early this summer I had the great honor of being interviewed by Randy Schwimmer for his inaugural issue of The Lead Left. If you're in the middle market, you're probably intimately familiar with Randy from his former senior role at Carlyle's lending arm, and his famous On The Left newsletter.
I'd like to thank Randy for the opportunity to be a part of his new venture. The interview is below:
TLL: Marek, your firm is probably not familiar to many of us. Tell us about what you guys do.
MO: We are an investment fund that focuses on special situations. That definition is pretty broad. We look for transactions with unique characteristics, particularly those that are typically unsuitable for traditional investors.
TLL: What kind does that involve?
MO: We like situations that are distressed, have a certain level of complexity, an unusual geography, or a unique business model. We also like opportunities that require specialized due diligence or research.
TLL: Where do your investments reside in the capital structure?
MO: Starting somewhere in the senior debt, but after that we go up and down the capital structure. For example, we just closed a deal where we simply acquired 100% of the asset as an all-equity transaction.
TLL: Give us an example.
MO: We recently acquired a property called Sirenusa, a high-end condominium complex located in St. John in the US Virgin Islands. A bank down there had foreclosed on it. That and the unusual location was what attracted us. Because capital is hard to come by in the Caribbean, there’s limited competition for deals.
TLL: I assume there’s also a decent supply of distressed situations.
MO: Exactly. So an all-cash buyer – as we are – is attractive to sellers. No contingencies and a quick close. The bank had been holding on for five years, but with the property empty it was still bleeding money. We offered a quick solution and, most important, a business plan to get back to profitability quickly.
TLL: What other locations offer similar opportunities?
MO: We’re looking at businesses and assets in and outside the US. I would describe the targets as “tertiary geographies.” Today, as an example, I had a call with some Greek investment bankers…
TLL: There are some of those left?
MO: (laughs) Yes! We’ve also considered Spain and Italy, though each country has its own complexities and risks. As recent borrowing rates show, those areas are recovering but still need liquidity. We are also careful to find partners with expertise in those niches. We are not global experts.
TLL: Where do you find deals?
MO: From a wide variety of sources: investment banks, middle market boutiques, brokers, personal connections. Also LinkedIn and Axial. Everyone wants to create proprietary deal flow. We’ll reach out to local operators. For example, we’re looking at solar energy businesses in Puerto Rico. So we find out who’s there now, get a few names and call them to understand the local business environment.
TLL: Where does your capital come from?
MO: My partner is Michael Freeburg. He runs and owns Greenwich Wealth Management, a $1.5 billion Registered Investment Advisor. Catalus’s investors are some of his biggest clients.
TLL: And typical investment size?
MO: $10-40 million is a good range for us, although we’ve considered as much as $100 million.
TLL: What’s your hit ratio on the deals you review?
MO: We say No to about 75% of the deals we give a superficial review. Ultimately only about 1% of those that make it through the initial filter make it to closing.
TLL: Who are the larger players doing what you do?
MO: Fortress and Cerberus have sub-strategies similar to ours. The difference is their size and that they have people on the ground. We like to partner with folks on the ground.
TLL: Are you industry agnostic?
MO: Yes, with some exceptions. We avoid specialized sectors like oil and gas exploration, mining, bio-tech, pharma, and insurance.
TLL: Let’s talk about this frothy lending market. Does it hurt your business?
MO: It certainly means a difficult time finding opportunities. Each quarter of last year things got a little more difficult. Rates and spreads are coming down, leverage going up, credit standards deteriorating, and covenants disappearing. That hurts us, especially our credit strategy. The power on deal terms has shifted from capital providers to sponsors.
TLL: So you’re just waiting for the next recession.
MO: That would certainly help our business. As Warren Buffett has said, you never know who’s swimming naked until the tide goes out. Lots of aggressive stuff is being done by our peers that might end badly in a downturn.
Which is why, in the next few years or so, if a recession does come and the tide goes out, we hope to fill the resulting liquidity gap.
I'd like to thank Randy for the opportunity to be a part of his new venture. The interview is below:
TLL: Marek, your firm is probably not familiar to many of us. Tell us about what you guys do.
MO: We are an investment fund that focuses on special situations. That definition is pretty broad. We look for transactions with unique characteristics, particularly those that are typically unsuitable for traditional investors.
TLL: What kind does that involve?
MO: We like situations that are distressed, have a certain level of complexity, an unusual geography, or a unique business model. We also like opportunities that require specialized due diligence or research.
TLL: Where do your investments reside in the capital structure?
MO: Starting somewhere in the senior debt, but after that we go up and down the capital structure. For example, we just closed a deal where we simply acquired 100% of the asset as an all-equity transaction.
TLL: Give us an example.
MO: We recently acquired a property called Sirenusa, a high-end condominium complex located in St. John in the US Virgin Islands. A bank down there had foreclosed on it. That and the unusual location was what attracted us. Because capital is hard to come by in the Caribbean, there’s limited competition for deals.
TLL: I assume there’s also a decent supply of distressed situations.
MO: Exactly. So an all-cash buyer – as we are – is attractive to sellers. No contingencies and a quick close. The bank had been holding on for five years, but with the property empty it was still bleeding money. We offered a quick solution and, most important, a business plan to get back to profitability quickly.
TLL: What other locations offer similar opportunities?
MO: We’re looking at businesses and assets in and outside the US. I would describe the targets as “tertiary geographies.” Today, as an example, I had a call with some Greek investment bankers…
TLL: There are some of those left?
MO: (laughs) Yes! We’ve also considered Spain and Italy, though each country has its own complexities and risks. As recent borrowing rates show, those areas are recovering but still need liquidity. We are also careful to find partners with expertise in those niches. We are not global experts.
TLL: Where do you find deals?
MO: From a wide variety of sources: investment banks, middle market boutiques, brokers, personal connections. Also LinkedIn and Axial. Everyone wants to create proprietary deal flow. We’ll reach out to local operators. For example, we’re looking at solar energy businesses in Puerto Rico. So we find out who’s there now, get a few names and call them to understand the local business environment.
TLL: Where does your capital come from?
MO: My partner is Michael Freeburg. He runs and owns Greenwich Wealth Management, a $1.5 billion Registered Investment Advisor. Catalus’s investors are some of his biggest clients.
TLL: And typical investment size?
MO: $10-40 million is a good range for us, although we’ve considered as much as $100 million.
TLL: What’s your hit ratio on the deals you review?
MO: We say No to about 75% of the deals we give a superficial review. Ultimately only about 1% of those that make it through the initial filter make it to closing.
TLL: Who are the larger players doing what you do?
MO: Fortress and Cerberus have sub-strategies similar to ours. The difference is their size and that they have people on the ground. We like to partner with folks on the ground.
TLL: Are you industry agnostic?
MO: Yes, with some exceptions. We avoid specialized sectors like oil and gas exploration, mining, bio-tech, pharma, and insurance.
TLL: Let’s talk about this frothy lending market. Does it hurt your business?
MO: It certainly means a difficult time finding opportunities. Each quarter of last year things got a little more difficult. Rates and spreads are coming down, leverage going up, credit standards deteriorating, and covenants disappearing. That hurts us, especially our credit strategy. The power on deal terms has shifted from capital providers to sponsors.
TLL: So you’re just waiting for the next recession.
MO: That would certainly help our business. As Warren Buffett has said, you never know who’s swimming naked until the tide goes out. Lots of aggressive stuff is being done by our peers that might end badly in a downturn.
Which is why, in the next few years or so, if a recession does come and the tide goes out, we hope to fill the resulting liquidity gap.
Wednesday, June 25, 2014
We're Hiring!
Catalus is growing and we are seeking to add to our investment team. We would love to hear from you if you meet the profile below.
Job Description: The fund is seeking a full-time Associate or Analyst to help support investment evaluation, deal sourcing, and other related tasks. The position reports directly to the head of the firm. Responsibilities include analyzing, summarizing, and presenting investment opportunities as well as assisting in deal sourcing, due diligence, and activities related to managing the firm. Preference will be given to those with experience in private equity, investment banking, bond/loan research, distressed investing, other investment research, or mezzanine/structured lending. An ability to work diligently in an unstructured/entrepreneurial environment is required. The position will allow for significant responsibility in the deal evaluation and investment process. This is an opportunity to get in at the ground level of a growing fund with significant expansion potential.
Responsibilities/Requirements:
Responsibilities/Requirements:
- Prior experience evaluating leveraged buyout, growth capital and/or debt financing transactions is a plus.
- Ability to quickly and effectively evaluate, summarize and present investment opportunities, often with little direction or oversight.
- Strong analytical skills to evaluate businesses, market opportunities, industries, etc.
- Strong communication skills and keen attention to detail. Applicant will be required to draft investment memorandum, present ideas to the fund’s investment team and interact directly with senior management of potential investments as well as investment bankers and advisors.
- Strong modeling / deal structuring skills. Applicant will be required to evaluate multiple potential investment structures and assess the impact on potential investments.
- Ability to work in a flexible and entrepreneurial environment.
Pay: Competitive based on experience
Thursday, June 5, 2014
When Dotting Your I’s and Crossing Your T’s isn’t Enough
It’s amazing the difference that one word can make in an 80,000 word document. Last month it came out that the fate of a $450m bond issued by Caesars Entertainment may be determined by an “and” that probably was meant to be an “or” in the loan documentation.
Read about the background of the story here:
http://www.bloomberg.com/news/2014-05-12/caesars-makes-and-four-letter-word-to-lenders-distressed-debt.html
http://www.bloombergview.com/articles/2014-05-13/caesars-and-the-450-million-and
It has often surprised me how little attention senior investment professionals pay to the intricate details of loan and investment documentation. The typical approach is to agree on the broad terms of the deal and let the lawyers and a junior member of the investment team handle the details. By the time the final redline is circulated days, weeks, or months later, the deal’s principal has moved on to the next transaction. But the minutiae of the documents are critical; they often are what save you, or bury you, in the event things don’t work out as planned. I feel that the common approach leaves a lot of potential value, optionality, or accuracy on the table.
For Catalus I personally read from beginning to end every investment related document that I sign or I will be bound to. I have hazy memories of one instance where that approach left me pulling an all-nighter because we had to close the investment the next morning. I find that level of involvement to be unusual in the industry and sometimes I get pressure to “just sign it already” because there are (often artificial) deadlines or people are fatigued from the legal process. But over the years I’ve been able to benefit our investors by catching errors and identifying areas where we can improve our position due to some extra scrutiny.
It has often surprised me how little attention senior investment professionals pay to the intricate details of loan and investment documentation. The typical approach is to agree on the broad terms of the deal and let the lawyers and a junior member of the investment team handle the details. By the time the final redline is circulated days, weeks, or months later, the deal’s principal has moved on to the next transaction. But the minutiae of the documents are critical; they often are what save you, or bury you, in the event things don’t work out as planned. I feel that the common approach leaves a lot of potential value, optionality, or accuracy on the table.
For Catalus I personally read from beginning to end every investment related document that I sign or I will be bound to. I have hazy memories of one instance where that approach left me pulling an all-nighter because we had to close the investment the next morning. I find that level of involvement to be unusual in the industry and sometimes I get pressure to “just sign it already” because there are (often artificial) deadlines or people are fatigued from the legal process. But over the years I’ve been able to benefit our investors by catching errors and identifying areas where we can improve our position due to some extra scrutiny.
The Caesars example is pretty extreme. Would I have caught the “and” that was supposed to be an “or”? No Way. I’m assuming that this clause was buried somewhere deep into the agreement, and by the time I’d get to that page I’d be struggling to focus on what I was reading. Even in the context of this article I had to read the clause 2-3 times before I understood the issue.
So maybe the typical approach isn’t so bad after all, even if you read every word you’re likely to miss stuff. But why not put in the effort to try to weed out as much as you can?
Thursday, March 6, 2014
Catalus Leases Sirenusa to Inspirato with American Express
Catalus Capital is pleased to announce that it has entered into a long term lease of its Sirenusa Residences in St. John, US Virgin Islands. All 14 of Catalus's villas will now exclusively be available to members of Inspirato with American Express, a luxury travel club with over 400 premier properties, 100 destinations, and 7,000 members. The villas will remain listed for sale by Sea Glass Properties, who also brokered the lease.
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