Commercial Real Estate Finance

Arlin S. Green is a partner at Argosy Real Estate, a leading source of equity capital for developers and operators. Arlin Green joined Argosy Real Estate in 2004. Previously he created and managed a substantial Real Estate and Venture Capital portfolio for the holding company of Firstrust Bank, a $2 billion commercial bank based in Philadelphia, Pennsylvania, for seven years. For the fourteen years prior, he was involved in Firstrust’s real estate lending among many other responsibilities, eventually rising to the position of Chief Operating Officer

Q: As a company, tell me about the niche you have carved out for yourself and how you feel you are different from the competition. Why do you find this product type more appealing than alternative real estate asset classes?

A: Argosy has been investing in different types of real estate since 1990.  Since that time, we have invested roughly half of our capital in garden-style apartments.  In the last few years, however, that proportion has grown to two-thirds.  Our competitive edge is found in three aspects of our strategy:

1.) Our ability to move among the different categories of real estate as opportunities present themselves;

2.) The relatively smaller size of the deals and the markets we go into; and

3.) Most of all, we spend an inordinate amount of time vetting our operating partners to find the very best at what they do and where they do it.

We continue to believe that the market for the smaller size deals (properties worth from $5 mm to $30 mm) in secondary and tertiary markets is still inefficient enough to allow a positive mismatch between return and risk.  In short, we look for value add opportunities with high caliber operating partners in real estate categories which make economic sense over the investment hold period.  In the last 18 to 24 months, garden-style apartments have been virtually unique in their continuing ability to obtain debt financing, thanks to Fannie Mae and Freddie Mac.  Accordingly, we have shifted to doing almost exclusively that type of real estate for now.  Having said that, we are always looking for and evaluating other opportunities — medical office buildings and student housing, to name a couple.

Q: How did you get your start in the business?

A: I had been in the banking business since getting out of Business School and Law School in 1983.  Eventually, I was the Chief Operating Officer of Firstrust Bank, a $2.5 billion bank here in Philadelphia which had been started as an S&L by my grandfather in 1934.  My interest in real estate came from the fact that, as an S&L, we were primarily real estate lenders.  Firstrust has evolved into a full commercial bank, but still does quite a bit of commercial real estate lending.  In any event, as the COO, I had responsibility for virtually all of the people, branches and systems, but not much involvement with the generation of new deals.  While I derived a lot of satisfaction from this position, I always wanted to be on the deal side of the business.  In order to fulfill that desire, I gave up my operating role at the bank and moved up to the bank’s holding company.  There, I created a $100 mm portfolio of investments in Real Estate, Real Estate Private Equity Funds, and Private Equity Funds investing in operating companies.  My first investment in pure Private Equity Funds was with an SBIC called Argosy Investment Partners.  I joined their Advisory Committee in 1997.  By 2004, our $100 mm portfolio was half-funded.  My father and brother wanted to take a breather from this type of investing to see whether or not it had been a good idea.  [As an aside, 12 years after starting this type of investing for the holding company, they are finally convinced that it was indeed a profitable venture.]  Since real estate and venture investing for the holding company had become my day job and the family wanted to take a break from it, I began a search for my next adventure.  Having known the Argosy guys for 7 years and having been very impressed with their smart, ethical approach to investing, I eagerly accepted the role as head of Argosy Real Estate when it was offered to me.  My task was to grow the real estate side of Argosy similarly to how the SBIC had grown.

Q: What is your favorite part of your job? Least favorite?

A: My favorite part of the job is discovering great operating partners and great investment opportunities.  My least favorite part — reviewing documents.  That’s why I never formally practiced law.

Q: What three adjectives would you use to best describe yourself as a business person?

A: Honest, ethical and fair.  Also, I’ve always said, “If you can’t have fun in your job, it’s not worth doing.”  So, at the risk of going outside the box and adding a fourth word to the answer to your question, I’d put in “fun-loving.”

Q: Do you feel the federal government has taken sufficient action in restoring confidence and liquidity in the commercial real estate markets?  If so, why?  If not, what steps would you like to see the federal government take?

A: I think the federal government will have to come down harder on the banks and force them to recognize the losses they’ve been “extending and pretending.”  That would cause an immediate hit for bank shareholders, but ultimately it would lead to a hastening of the bottom to this cycle, and would allow investors to feel confident about coming back into the market.

Q: If you weren’t in real estate, what would you be doing with your life?

A: I would either enter politics or teaching, or both.  My personal mission statement has always been – “To affect positively as many people as possible.”  While I believe that my banking and investment careers have moved me toward that goal, politics and teaching would help me achieve it.

Q: What keeps you up at night?

A: I hate the idea of losing money.  Fortunately, we don’t have many situations where that is a real possibility, but those that are keep me up at night.  I also have six children, so I have lots to keep me up at night when business issues don’t.

Q: What organizations, charities etc are you a member of? Why are they important to you?

A: My Non-Profit Board Memberships have followed my life.  I was on a couple of school boards when my kids were younger.  Between my love of animals and having six kids, I don’t need to explain any further why being on the Philadelphia Zoo Board was appropriate for 10 years.  And most recently, I joined the Lankenau Hospital Foundation Board – at age 54, this too does not need much explanation.  I have always been on at least one non-profit board as a way of helping the community in some way outside of work – it helps me fulfill my personal mission as described earlier.