1. Investment
firm
planning
$100-­‐‑million
fund
-­‐By
Meghan
Streit
Cinterra
Group,
a
Chicago-­‐based
firm
that
provides
capital
to
small
and
mid-­‐sized
residential
developments,
plans
to
begin
raising
equity
next
month
for
a
$100-­‐million
investment
fund.
It’s
an
ambitious
goal
for
a
company
started
just
three
years
ago
by
four
twentysomethings.
Cinterra,
which
recently
raised
$10
million
for
its
first
investment
fund,
sees
a
big
opportunity
in
financing
smaller
developers.
That
market
segment
typically
is
unable
to
access
traditional
financing,
a
big
disadvantage
when
they
need
to
move
quickly
on
an
acquisition.
“Developers
who
are
going
to
build
a
150-­‐unit
high
rise
can
go
to
Lehman
Brothers
for
mezzanine
financing,”
says
Chad
Kowal,
Cinterra’s
27-­‐year-­‐old
chairman.
Cinterra’s
existing
$10-­‐million
fund
lends
developers
up
to
$1
million
in
a
hybrid
of
interim
and
mezzanine
financing.
Mr.
Kowal
says
Cinterra’s
typical
transaction
is
in
the
$50,000
to
$350,000
range,
usually
financing
the
development
of
luxury
single-­‐family
homes
or
condominiums
up
to
six
units.
Cinterra
closed
19
transactions
last
year,
and
none
delivered
an
annual
rate
of
return
less
than
36%,
Mr.
Kowal
says.
He
aims
to
complete
60
transactions
this
year.
Mr.
Kowal
got
into
the
lending
business
while
working
as
a
broker
at
Chicago-­‐based
Sheldon
Good
&
Co.
He
and
Robert
Keleghan,
another
Sheldon
Good
broker,
loaned
$50,000
of
their
own
money
to
a
small
developer
in
2004,
deciding
soon
thereafter
to
head
out
on
their
own.
They
joined
forces
with
Erik
Miller,
who
previously
worked
for
Chicago-­‐based
private-­‐
equity
firm
New
Trier
Partners,
and
Patrick
Maliszewski,
a
former
Northwestern
Mutual
Life
Insurance
Co.
financial
adviser.
After
successfully
closing
several
deals
in
2006
and
piquing
the
interest
of
investors,
the
foursome
officially
launched
its
first
fund
in
January
2007.
Mr.
Keleghan,
28,
is
Cinterra’s
executive
vice-­‐
president,
managing
its
relationships
with
real
estate
developers
and
brokers,
while
Mr.
Miller,
the
firm’s
28-­‐year-­‐old
chief
operating
officer,
handles
legal
and
accounting
issues.
Mr.
Maliszewski,
also
28,
is
Cinterra’s
executive
director
of
investor
relations.
Four
institutional
investors,
two
of
which
are
insurance
companies,
and
21
high-­‐net-­‐worth
individuals
comprise
the
firm’s
investors.
The
group
includes
Brad
Pins,
a
chiropractor
who
has
most
of
his
money
in
traditional
investments
like
mutual
funds
and
retirement
plans.
Though
he
was
“a
little
hesitant”
to
invest
at
first,
he
decided
to
take
a
risk
on
the
Cinterra
fund.
“I
asked
some
questions,
and
they
had
good
answers,”
he
says.
Cinterra
Group
Chairman;
Chad
Kowal
The
decision
paid
off:
On
one
$2,500
investment,
Mr.
Pins
says
he
earned
$500
in
two
weeks.
However,
the
sluggish
residential
real
estate
market
in
Chicago
could
present
a
challenge
for
Cinterra
as
it
raises
money
for
the
$100-­‐
million
fund.
With
properties
languishing
on
the
market
for
months,
and
developers
scrambling
to
fill
vacant
units,
potential
investors
could
be
skeptical
about
Cinterra’s
chances
of
continuing
to
generate
healthy
returns.
Acknowledging
the
increased
risk,
Mr.
Kowal
says
some
pockets
of
the
market
still
offer
opportunity.
He
adds
that
he
and
his
colleagues
conduct
rigorous
research
before
investing
in
a
project.
Real
estate
consultant
Steve
Hovany
agrees
that
smaller
developers
are
still
able
to
thrive
in
the
sluggish
Chicago
market.
“We
see
the
most
action
in
smaller
projects,”
says
Mr.
Hovany,
president
of
Strategy
Planning
Associates,
a
Schaumburg-­‐based
urban
planning
and
real
estate
development
consulting
firm.
Cinterra
“is
probably
right
on
in
what
[they’re]
doing.
It’s
the
bigger
developers
that
are
like
beached
whales
right
now.”