The Mini-Moguls at the Gate
Billy Gray April 23, 2013, 10 a.m.
Marilyn Kane doesn’t miss being a schoolteacher. “People ask me that all the time,” Ms. Kane said. “And I don’t really. But I do enjoy explaining things well to people and seeing that light go on.”
Ms. Kane is the president and a founding partner of Iridium Capital, a real estate fund management company with an emphasis on retail properties (including Walgreens and 7-Eleven) and an exclusive focus on triple net leases. Hatched by Ms. Kane, her husband David Kane and Chief Financial Officer Sean Shanahan during the depths of the Great Recession, Iridium aims to mint what Ms. Kane calls “mini-moguls,” opening its doors to investors lacking beaucoup capital and investment expertise.
Although she no longer teaches in the classroom, Ms. Kane is a fixture on the financial lecture circuit, and she takes pride in introducing largely female audiences to the possibilities of real estate investment. She aims to erase “that deer in the headlight look” that often greets an economics crash course, “especially with women,” Ms. Kane said. “They’ll say, ‘Oh, finance—I don’t know that.’ And I tell them, ‘Do not say that to me.’”
Ms. Kane’s first real estate instructor was Norman Bobrow, the founder of tenant representation brokerage Norman Bobrow & Company. She graduated from New York University in 1970. After working at a school on the then-terrifying intersection of Avenue A and 12th Street—“we’re talking about crack all over the place, a policeman shot two blocks away”—and then at Random House, she found herself in 1986 in need of a more lucrative position.
“The father of my children had separated from the family,” Ms. Kane said. “And I needed to make more money. Back then, that often meant selling copy machines or cars, but someone suggested real estate. I took the courses and was offered to join with Norman Bobrow. He was a marvelous mentor.” Ms. Kane went on to become a broker and then a principal of the firm Sperry Van Ness Butler Kane.
After the crash of 2008, Ms. Kane’s evolution from broker to principal progressed to the point where she could start a fund. “I was just going to do commercial real estate,” she said. “But the idea started fomenting. I personally wanted to look into some very safe real estate investments. It was such an interesting time,” she said of the Great Recession. “And I hope it happens again in your lifetime.”
Ms. Kane had sharpened her investment savvy over the years by taking courses, especially those on net lease property, in which the tenant pays some or all of the expenses typically paid by the property owner. Under a triple net lease, the tenant pays all real estate taxes, insurance and maintenance.
“It seemed amazing to me at the time that you could buy a property and not have any responsibility for maintenance,” Ms. Kane said. Iridium, formed in 2009, set out to acquire triple net properties, most of which are freestanding retail locations.
Was 2009 an impractical or canny time to start a real estate investment fund? “I think you could look at it both ways,” Ms. Kane said. “People had lost so much money in the stock market, but there was money around. Where should they put it? I thought that safety and comfort level were two incredible things. And I had found them for myself through terminology that was all new to me. I did not understand that you could structure property ownership into a limited liability company or hedge fund. Was it a foolish time to do it? I think it was a good time, because people were looking for that investment. But it did seem a little crazy to start something then. The economy was in despair.”
Mr. Shanahan, who had the misfortune of graduating from Fordham in the midst of the recession, was all too familiar with the economy’s woes. “It was very hard to find jobs with a finance degree,” he said. “I received three offers, and all were rescinded. In college I’d received my real estate license, and I had an interview with Marilyn in February 2009. When I came in to interview, she invited me to stay the whole day.”
“We hit it off,” Ms. Kane said.
“But yes,” Mr. Kane said, “2009 was a really bad time to start an investment fund.”
And yet there were advantages of timing for the type of portfolio Iridium sought to build. “People were no longer satisfied with stocks, bonds and mutual funds,” Mr. Shanahan said. As counterintuitive as it may have seemed to the layman at the time, real estate and other nontraditional investments were an attractive safe haven. “I think the recession was one of the best things to happen to the alternative investment sphere,” he said. “People became much more involved with and educated about what they were investing in, and why. “
Iridium’s core investments mostly revolve around minimum 8,000-square-foot triple net lease retail properties, although the fund has expanded its scope to include medical and industrial assets. Walgreens, Dollar General and 7-Eleven are among the fund’s major holdings. “Nobody’s worried about Walgreens,” Mr. Shanahan said. “People know they’re going to be selling toothbrushes and deodorant until the end of time.”
Ms. Kane relishes the opportunity to enlighten novice and intermediate real estate investors on the potential returns of triple net leases. “I ask my lecture audiences if they would like to participate at a smaller level and get higher returns than if they owned a little multifamily property in Brooklyn,” she said. “We’re talking 7 or 8 percent, not 4 or 5 percent, and without the headaches of maintenance, taxes and insurance. Wouldn’t that be remarkable? And they’ve never heard of this.”
While Ms. Kane wouldn’t define her investor outreach in feminist terms, she does seem intent on passing on the knowledge she’s gleaned over time to other women. And, as a 32-year commercial real estate veteran, she thinks it’s a pity how little progress women have made in the industry.
“The fact is there’s been very little percentage increase of women in the high-level jobs,” she said. “I think it’s still fairly abysmal. Women brokers will participate on a team, work themselves to the bone and barely make a living. The people who were getting the glory 20 years ago are still getting the glory. Even the leading women in real estate are very often third generation. Look at the Rose family. When [Amy Rose] is on a forum talking about her trials and tribulations—give me a break. She’s third generation and owns 100 buildings in Manhattan.”
On the subject of trials, Ms. Kane’s work outside of real estate includes founding in 1995 the New York chapter of the Coalition for Family Justice, a child support advocacy group. “We made new legislation on deadbeat parents,” she said. “I participated with the FBI, and [in 1995] we arrested my ex-husband [Jeffrey Nichols], who’d crossed state lines a number of times to evade child support payments.” Mr. Nichols, a precious metals guru and former vice president at Goldman Sachs, once sent Ms. Kane a postcard from a Hawaii vacation that read, “Having a ball. Glad you’re not here.” People magazine dubbed him “America’s most notorious deadbeat dad,” and the story partly inspired the movie The First Wives Club.
Ms. Kane’s current husband, David, is the vice president of Iridium. Last year, the fund made $16 million worth of acquisitions. Mr. Shanahan said that next month it expects to acquire seven properties for $14.2 million. In 2013, Iridium should make about $50 million in total acquisitions. Investors can expect returns between 10 and 15 percent.
7-Eleven, currently undergoing a major Manhattan expansion, is one of the fund’s signature investments. “Over the next three years, they’re trying to hit 1,000 new stores,” Mr. Shanahan said. “Half of those are expected to be in urban markets like New York.” The convenience store envisions about 130 Manhattan locations, and the company’s growth has riled some locals wary of increasingly generic, corporatized neighborhoods.
The planned 7-Eleven at 170 Avenue A, a block away from the school where Ms. Kane taught, has aroused especially strident opposition. The Iridium partners understand, and even share, the concerns. “We ended up with a 7-Eleven on Madison Avenue and 33rd Street,” Ms. Kane said. “I can’t believe the landlord, Newmark, allowed it. I thought it dragged down the building.” Mr. Shanahan said that three delis in the neighborhood closed within five months of the store opening.
Still, 7-Eleven has helped Iridium grow and produce increasingly rosy returns for its investors, who can enter the hedge fund for $100,000. Ms. Kane has enjoyed offering counsel—whether to schoolchildren, young employees, green investors or jilted ex-spouses—after a life marked by professional achievement and one very public personal struggle.
“It all makes for a story,” she said. “It makes for a life. You live every day to the fullest and try to do good things for good people. And to embrace who you think are quality people.”