With its recent purchase of Universal Health Care's former headquarters, Convergent Capital Partners instantly established itself as an important player in downtown St. Petersburg's torrid office market.
At the same time, the Tampa-based real estate equity firm burnished its reputation as a canny judge of attractive but underperforming properties throughout the bay area and as far away as Chicago, where it has a 200,000-square-foot suburban office building.
"We tend to follow where the opportunity is," managing director Nik Sachdev says.
Since 2008, when the economy teetered dangerously close to collapse, Convergent has acquired more than $460 million worth of mortgages and real estate including hotels, gas stations, medical offices, luxury condos and even a golf course. Among its better-known local holdings: the Hyatt hotel in Clearwater and the Knights Point center on Tampa's Harbour Island, home of the popular Jackson's Bistro and many now-vacant storefronts.
Convergent is eying another $50 million to $75 million in real estate it hopes to acquire within 12 months.
While the privately owned company doesn't talk about returns on individual investments, "we've been successful in all projects to date," Sachdev says.
A University of Michigan graduate and a former banker, Sachdev, 35, started Convergent with partners Santosh Govindaraju, 38, who began his career trading fixed-income derivatives, and Paul Beraquit, the "on the ground" partner who handles the physical aspects of their real estate deals.
In an interview last week with the Tampa Bay Times, Sachdev discussed Convergent's beginnings, its investment strategy and why it's bullish on Tampa Bay.
Why did you start Convergent in 2008, a terrible time for most new companies?
We saw the opportunity that was in the (real estate) market with the economy the way it was. We spent most of 2008 fundraising. It was a very difficult time, but we found a group of high-net-worth individuals who trusted us. At the beginning we were buying a lot of distressed notes and mortgages on big real estate projects — hotels, apartment buildings, completed townhome projects, office projects where the borrowers were just too overleveraged.
Why did you want mortgages instead of the actual property?
We knew we were going to be in the market a long time, and the real estate developer who faces trouble eventually is going to be back — we've already seen them come back. We want to maintain relationships with all these people because they are dealmakers. There are a lot of firms in Florida that bought mortgages with the intent to foreclose and own the asset, and they've done very well, but our focus wasn't that. The borrower knows the asset best. From 2008 to today, we have bought probably 50 mortgages and worked out 49 of them.
What was Convergent's first deal?
It was a townhouse of 40 units developed near USF (University of South Florida) in Tampa. Then we bought a large apartment complex of over 150 units in the USF area, the St. Moritz. We bought it when it was very, very distressed, and put a lot of resources and money into it, and now it's a thriving apartment community that was 15 percent occupied when we bought it. We sold it about six months ago and it was 90 percent occupied.
Convergent has several hotels, including the new Aloft in downtown Tampa, a Holiday Inn Express in Naples and Candlewood Suites hotels in Hilton Head, S.C., Charleston, S.C., and Athens, Ga. Why so many hotels?
One industry we're very bullish on is hospitality. The economy is picking up, and it's still a sector of real estate that hasn't completely come back yet in these secondary markets like Tampa. The New Yorks, the D.C.s have all come back, but these secondary markets are still very good investment opportunities.
How has your investment strategy changed over the years?
In 2008 and 2009, we were invested in multifamily (housing), but that became so overheated we got out. Between 2008 to the end of 2012, we invested heavily in notes and mortgages, but now the market has shifted, there's not a lot of distressed notes and mortgages. In the past 18 months, we've turned more to where we're building a real estate portfolio with Class A assets.
The Universal Health Care building, we were able to buy 130,000 square feet in the heart of St. Petersburg for below replacement cost when St. Petersburg is growing phenomenally. Knights Point is one of the few remaining waterfront sites in Tampa that is not as fully developed as it should be. It's a beautiful location, but it needs a little cash, the property needs to be attended to.
What are your plans for the Universal Health Care building?
There are a lot of different options we can pursue there. We want to sit down with our team and officials in St. Pete and work on a plan that would be successful for everyone. It could be both office and retail, or it could be just office. The good thing is it's well located, there are multiple uses for that property and we just want to make sure we do the right thing.
How about the 130,000-square-foot Knights Point center, home to Jackson's Bistro and once known as the Shops at Harbor Island?
Obviously, we want more restaurant concepts and more offices. We want to add a marina. We want it to feed off the great urban location, to feed off what (Tampa Bay Lightning owner) Jeff Vinik is doing, to feed off the convention center.
Do you expect more investments in the Tampa Bay area?
We love the Tampa Bay market, St. Pete included. We see a lot of room for growth and we want to be part of it. But we have invested in other areas and continue to look. We really like Naples and Bonita Springs; it's a very strong kind of retirement community, and we like the demand drivers there.
Why do you think Convergent has been successful so far?
We're very selective, but once we identify an asset class we move quickly. One of our advantages is speed; it gives us a lot of advantage in this market. And we've never retreated on a deal. We always do what we say. That's how we establish credibility.
Contact Susan Taylor Martin at email@example.com or (727) 893-8642. Follow @susanskate.