Tom Rizk, co-founder and CEO of investment firm Rizk Ventures, has seen his share of real estate market ups and downs.
In 1994 at 37 years old, he led his firm Cali Realty into the modern era of real estate investment trusts by taking it public to become one of the youngest CEOs of a New York Stock Exchange-traded company. At the time of that public offering, Cali owned 13 buildings with a total stock market value of about $300 million. When he retired from that job five years later, the total value of the company was almost $4 billion.
But after retiring from what had become Mack Cali Realty — now known as Veris Residential — Rizk became busier by leading Rizk Ventures in New York City. It operated, owned and sold businesses, both public and private, in the real estate, healthcare and technology industries. The company has three property firms, Workspace Property Trust, SpareBox Storage and Blacktop Industrial Trust, and software companies including Counter Forced Labor Technologies that provides artificial intelligence to companies' supply chain operations.
This summer, Rizk’s Workspace Property Trust, one of the largest U.S. suburban commercial office property owners, did what few firms have been able to pull off: It secured a two-year extension for loans tied to a $1.3 billion commercial mortgage-backed securities deal. The loans finance a portfolio of 146 suburban office and light industrial, research and development and flex industrial properties in 14 major metropolitan areas.
CoStar News chatted with Rizk about how today’s markets match up to years past and how his investments in technology are leading into the next new era for real estate.
CoStar: You took a REIT public, while these days more of the new funds seem to be private REITs. What's your assessment of the best way to approach fundraising to grow a real estate portfolio?
Rizk: It's difficult to raise money in the public markets. One of the big reasons for that is the very big spread between the cost of the debt and the yield on the purchase. Today, you've got debt costs that feel like they're in the 8% to 9% range. And yet, the pricing on these assets has not gotten materially cheaper. For example, if you're buying an industrial portfolio, you might be in the mid-5%, but the finance might be at 9%. That clearly does not work for a public company. In today's environment, it's much easier to think about private capital that doesn't have to do month-to-month or quarterly public reporting.
CoStar: Let’s go back to October 1996, when Cali Realty acquired the Harborside Financial Center in Jersey City, New Jersey. What drove that decision?
Rizk: That was the single largest real estate acquisition in New Jersey's history when we did it. First, let me tell you why. I was actually born in Jersey City, and what I saw at the time in the early '90s was a blighted real estate area along the Hudson River. I would drive by and think I could throw a stone at the World Trade Center. But as I looked at it, I said, this real estate someday is going to be extremely valuable, as was the World Trade Center. So, when I had the opportunity to buy Harborside, the picture was Jersey City should be moving in the positive direction because of its proximity to the World Trade Center. I got involved in discussions with the city and was involved in the planning of the light rail in Jersey City, the planning of the walkway in Jersey City. I helped with the planning, the construction of the Grove Street path station in Jersey City.
CoStar: Where are those kinds of opportunities today?
Rizk: Well, the big macro is there's been a constant shift of the demographics to the suburbs. Ten to 15 years ago, the conventional wisdom was that wasn't going to happen. Everyone was going to live, work and play in the city. We never bought that. We said slowly, but surely, the migration to the suburbs is going to outpace population to cities. This has happened. The pandemic accelerated that. Everything I own is in the suburbs ... I don't own anything in the city. The suburbs are where the opportunity is going to be.
CoStar: When you resurfaced after leaving Mack Cali, you did so as a software tech patent holder. What does the intersection of technology and real estate look like today and where is the growth?
Rizk: So how do we think about the technology impacting what we own, right? A simple example is we bought self-storage in the suburbs, and we developed technology to operate it remotely. We felt that was a real need. Self-storage that's remotely operated is much more valuable, Folks have access 24/7. They can do it remotely.
CoStar: How do you view artificial intelligence, and what is its relationship and impact on real estate going forward?
Rizk: AI potentially could predict where occupancies are going to be. It could take the data and say, "Here's where you want to be. Here's where you don't want to be." AI can consume and analyze data at rates that we can't even conceive. Data-driven macroeconomics projection of interest rates, projection of occupancies, where's the population going to go. We talk about this stuff all the time. But once a machine starts analyzing every piece of data, they're going to be a lot better at it than us. So, I think it'll have a big impact.