As head of finance for HighPoint Holdings, Pat Sullivan wants to expand the apartment owner’s portfolio by speaking the language of institutional investors.
After spending a decade toiling for health-care REIT Medical Properties Trust, as well as two banks, in Birmingham, Ala., Pat Sullivan wanted to experience the more entrepreneurial, private side of business in his hometown. Sullivan, 34, got the chance in 2010, when he scored the director of finance and administration job at Birmingham-based HighPoint Holdings, a private equity investment firm focused on Class A multi-family apartments with more than 3,000 units in five states. One thing Sullivan didn’t have to worry about was having to clean up HighPoint’s balance sheet. Going into 2008, the company didn’t face many of the issues other apartment owners encountered as the economy teetered on collapse. HighPoint had only around 1,500 units but had plenty of dry powder.
That situation appealed to Sullivan. In 2008, the firm had started to partner with billion-dollar-plus, family-owned funds and smaller private-equity groups to position itself to buy when the market turned up. It added three properties in 2010 and four more in 2011. While that may be a drop in the bucket for a big firm, it moved the needle a lot for a small, private owner by doubling HighPoint’s holdings in the apartment business and increasing its apartment portfolio value to $300 million.
Sullivan’s job is to line up financial backers to expand the portfolio even further. With his institutional experience, Sullivan has started work on HighPoint’s first fund, which is targeting about $50 million from pension funds and small private-equity groups. He says this will give the firm, which typically does one-off deals, the chance to make multiple buys at once.
“I really want to [lend] the organization more sophistication, creating some capital structures that are more attractive to institutional groups,” Sullivan says.
To achieve his goal, Sullivan speaks to institutional players in a language they understand. “My background is probably the biggest asset I bring,” he says.
So far, pitching these investors hasn’t required Sullivan to upgrade HighPoint’s financial systems, but that could occur soon, because of their need for timely information and predictable reporting.
“Our high–net-worth investors are looking at overarching concepts, like what’s going on at the properties they own,” Sullivan says. “The institutional guys [conversely] really want to get down into the specifics of what’s happening with the market.”
The track record established over the past 25 years at HighPoint gives Sullivan something to pitch. For example, the firm employs a conservative model with realistic IRRs with a five- to seven-year hold. “We’ve been extremely consistent in our market niche,” he says. “And we’ve had good success. I think it resonates with the institutional guys.”