Alexander Shing started Cottonwood Group 12 years ago “to capitalize on the opportunities that came about after the GFC (global financial crisis of 2008).”
Over the last five years, the downtown-based real estate investment firm has grown its gross assets – including debt, equity, development, EB-5 and advisory investments – from $3 billion to $6.4 billion. Shing, Cottonwood’s chief executive, attributes the growth to a cautious investment strategy.
Operating under the lens of changing economic cycles in the last five years, Shing recalled taking note of indicators – such as offices trading at 4% or below rate cap – that it wasn’t an ideal time to go on a buying spree. Acting with restraint throughout that time allows Cottonwood to now operate relatively care-free, Shing said.
“Because we’ve been cautious, we are not dogged by our own sets of troubles,” he added. “If half of your portfolio is underwater and you’re worried about writing down your investments, you don’t get a lot of mindshare to think about new deals, putting out new money… We don’t have that distraction so we can focus on what is the opportunity today.”
Shannon Ching, principal of HP Investors’ El Segundo office, evaluated Cottonwood’s growth.
“In a time when there’s a very capital-constrained world and the cost of capital has gotten a lot more expensive, to be able to raise that kind of capital in the last couple of years is very impressive,” Ching said. “That tells me that a lot of their investors are probably institutional.”
Ching also shared his insights on the investing landscape recently, relative to an inactive approach versus an active one.
“In the last couple of years, for the most part, values have probably decreased rather than increased in general. If (Cottonwood) was very inactive by design and waiting to observe the market, then they don’t have any legacy problems to deal with today in the short term,” Ching said.
While…
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