Brian Kavoogian

Title: President, Charles River Realty Investors

Age: 49

Experience: 27 years

Brian Kavoogian put together the financing for what some real estate executives have called the most important suburban office deal of the year for Charles River Realty Investors, the fund shop he formed with National Development in 2006, bought the 640,000-square-foot Unicorn Office Park in Woburn for $78 million this summer. Kavoogian is the current president of NAIOP Massachusetts.

Q: You’ve built your company up alongside one the most respected developers in the region. How did you get started in commercial real estate?

A: I was very lucky to get an internship at Meredith and Grew while I was a junior, and it changed everything for me. From there I actually spent the summer after I graduated from college working with Tom Alperin … as his first employee, as he had just started the National Development operation in Boston. Then I went to work with [the company] that became Holliday Fenoglio Fowler. It was an incredible way to get to know the real estate business. I spent 17 years there working up-close with our best developers and investors. In 2000 I decided I wanted to move into the principal side of the business so I joined Jon Davis and Paul Marcus as a partner in their firm. Then in 2004, I started my own firm, Charles River Realty Advisors. And the initial notion was that I would build a firm competitive with many of my past clients and colleagues. After a couple years I decided the world was moving to investing capital in a discretionary fund format, and so I came to National Development and said, let’s build a private equity real estate business. Let’s raise a series of funds geared towards making value-added real estate investments with a real focus on Greater Boston. We did it at the right time. In 2006, we raised our first fund. Thankfully, I had made a decision to largely stay out of the market because it felt incredibly frothy, and so while most people were investing heavily through 2007 and 2008, largely we held our fire and kept our powder dry. We watched the market collapse and re-price, at which point we became fairly aggressive investors in 2009, 2010 and to this day.

Q: Why did you keep your powder dry while everyone else decided to get theirs soaking wet?

A: The assumptions that you were required to believe just seemed unsustainable and unrealistic. The things you needed to believe about rent growth and ultimate sale prices were not believable, especially in the context of replacement costs. Much of what was going on was largely driven by the availability of debt capital, and typically, when debt becomes increasingly available, the benefit of increased availability of debt inures to the sellers of the assets because the values rise. Rarely does the buyer get the benefit of that leverage, and sure enough that’s what happened, and prices went up and up and up, enabled by cheap debt. It was not easy to hold your fire in that period of time. All of our competitors, many of whom had raised funds and were deploying them much quicker than we were made you really question periodically about whether you were doing the right thing. Now, the returns in our fund are among the best in the nation of all real estate funds that were formed in 2006, so our investors have received the benefit of our discretion, and that leaves us in a much better position to raise subsequent funds.

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Q: What are the product types that you are trying to be most aggressive on?

A: Funds like ours are raised with investment periods of three to four years. Over that period, market conditions change, and it becomes very important to be flexible, both in terms of the product types and the strategy you’re implementing. You look at our Fund I, whereas we had expected to be invested heavily in office buildings and retail and multifamily, and instead we did two hotels. Frankly they were darn compelling investments. As we look out today, we continue to be believers in the office market in Boston. We think we’re at the early end of a recovery, and rents have a ways to go before they reach replacement cost levels. Generally, within the office sector, we are increasingly focused on closer-in locations. However, there are times when things are completely mispriced in the suburbs, and we invest there. We think there will be increasing opportunities in the retail sector, given all of the creative destruction that’s gone on there with retailers like Filene’s Basement and Borders disappearing, and the changes that continue to occur in the supermarket segment. All of that is resulting in vacancies. We certainly don’t think all retail is bad. There are locations that we would like to own and reposition. You have to be selective. We are perfectly happy to invest in quality retail locations and utilize our relationships to fill that space with retailers that continue to believe in the Boston marketplace.

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1) Be the most prepared

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4) Build your personal brand in the industry-get out of the office

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