INVESTING EFFORT
Daryl Carter, Partner Count $6B in Funds
By SANDI CAIN
When onetime high school buddies Daryl Carter and Quintin Primo reunited in Chicago in the mid-’80s, they thought they were simply picking up where they’d left off at Cass Technical High School in Detroit. Though they’d gone separate ways after graduation, both earned business degrees from prestigious colleges,Carter from the Massachusetts Institute of Technology and Primo from Harvard University. And both worked in the real estate divisions of large banks.
But after starting investment firms just in time for the disintegration of the real estate market in the early ’90s, they decided to join forces. Convinced they could carve a niche by persuading pension funds to fill a void in commercial real estate financing, they searched for investors who shared their vision.
That search paid off when they caught the eye of old-line British firm Chesterton PLC, which counted the royal family and Church of England as clients. Chesterton made an initial investment of $100,000, and Carter Primo Ches-terton LP was launched in 1992.
Carter and Primo, both now 47, held a 51% interest in the firm, which aimed to build an institutional advisory and mortgage capital business.
“We’re trying to figure out how to build a better mousetrap,” Carter told Fortune magazine in 1993.
Today, that mousetrap,now called Capri Capital,has become a diversified real estate financial services firm with $6 billion in assets under management and 110 employees in five offices, including the Chicago headquarters where Primo works, and Irvine, where Carter spends his days.
The firm also has offices in Walnut Creek, Detroit and Arlington, Va., and its portfolio encompasses loans in 38 states plus Washington, D.C.
In recognition of the company’s growth and accomplishments, Carter received an Excellence in Entrepreneurship award from the Orange County Business Journal this month.
Co-chairmen Carter and Primo believe their partnership is a factor in their success.
“Most partnerships don’t work, but ours does,” Carter told the audience at the awards luncheon.
That may be due in part to their different personalities.
Carter is a self-described practical manager, while he calls Primo the “visionary.”
“Quintin is looking at the next 10 to 20 years and I’m looking at next month,” he told Commercial Property News in an interview.
The company has achieved much of its growth through mergers and acquisitions, developing some impressive credentials along the way: it’s the largest African-American-owned real estate investment firm in the country, the only one with a pension fund advisory business and the only one that’s a Fannie Mae lender.
It’s ranked among the 50 largest commercial mortgage lenders in the nation by Commercial Property News, and it’s one of only 10 multifamily lenders in the nation to have a relationship with all three multifamily agencies,Fannie Mae, Freddie Mac and the Department of Housing and Urban Development.
One of its subsidiaries, Capri Capital Finance, is one of the largest multifamily lenders in the country. The other, Capri/Capital Advisors, is a pension fund investment subsidiary that is among the 20 largest real estate investment managers in the U.S.
Capri counts the California Public Employees Retirement System and Erie Insurance Co. among its two dozen investors and handles loans for groups like American Apartment Communities, AMLI Residential, Sares-Regis Group and Western National Properties. It has alliances with Bank One, GMAC Commercial Mortgage and others.
Though the firm has seen what some call phenomenal growth,it had less than $1 billion in assets under management as recently as 1997,the personable Carter is quick to admit that things weren’t always easy.
“Dealing with uncertainty has been one of the biggest challenges,” he said. “After a while, it becomes a way of life.”
The firm was founded in December 1992, but it was 1994 before the duo got its first institutional advisory client. And in 1996 it lost its largest pension client,the State of Connecticut Trust Funds,when that fund consolidated its holdings.
At the time, Primo called the loss a “wake-up call” for the firm to increase its efforts to diversify.
To that end, Capri acquired the multifamily mortgage banking subsidiary of First Tennessee Bank in 1997. That subsidiary included more than $1 billion in mortgage service along with the coveted Fannie Mae Delegated Underwriting and Servicing and HUD multifamily lending licenses. Lenders under the programs can process loans in the $2 million to $25 million range without pre-approval from Fannie Mae, a situation that is said to ease cash flow for these lenders.
The same year, Carter and Primo bought out Chesterton and changed the company name to Capri Capital LP,Capri being a combination of the partners’ last names.
Between 1998 and 2000, the firm acquired other companies and portfolios, including Washington Capital Associates, a multifamily lender with a $2.5 billion portfolio. At the time, Capri had annual revenue of less than $5 million.
By 2000, the company had purchased a major portfolio from GMAC Commercial Mortgage and formed an alliance with GMAC. The company also acquired a majority interest in Chicago-based Capital Associates, an equity multifamily pension advisory firm with $1 billion in assets under management, and a Freddie Mac Program Plus seller service license.
Then the company launched Capri Select Income LLC, a commingled mezzanine investment fund capitalized with more than $100 million from institutional investors.
Last year, Capri was one of three Orange County real estate investment firms to receive funds for urban infill projects from the California Public Employees’ Retirement System, bolstering by $60 million the multi-million dollar investment that Capri had already made in Santa Ana alone.
“Inner cities are underserved by capital, and it’s innovative of CalPERS to invest in that sector,” Carter told the Business Journal at the time. The CalPERS funds are being invested in California, Carter said.
Carter, a Laguna Beach resident, and Primo are proud of their role as pioneers as African-Americans in the real estate investment business. They believe that role gives them a special mentoring responsibility and the company tries to recruit minority professionals,including women and Hispanics,whenever possible.
They also have a sense of community. Carter is a trustee of the Urban Land Institute, on the board of the national Multifamily Housing Association and is an independent director of Catellus Development Corp.
Primo, is a member of the Urban Land Institute, a trustee of AMLI Residential Properties Trust and chairman of the Urban Family and Community Centers, a social service agency on the West side of Chicago. Both are members of the Pension Real Estate Association.
But in offering advice to budding entrepreneurs, Carter had this to say: “Be patient. And make sure you take time to get away now and then, because you need to do that.”
