The New York-based fund manager hires 30 year veteran

Published in REFI US by Samantha Rowan

NEW YORK (March 11th, 2020) – KPG Funds has hired Steve Smith, an Iron Point Partners and Westbrook Partners alumnus, as its chief financial officer.

The New York-based company, which invests in its hometown via a series of private equity funds, is targeting $200m for the fund and hopes to hold the first close in the second quarter.

Having Smith on board will help to bolster the firm’s finance, accounting and investment management team, as it seeks to grow and expand institutional relationships and tap into the distress that’s emerging in New York, CEO Greg Kraut told REFI.

“At the end of the day, if you’re not growing, you’re dying. Businesses do their best when they build during troughs and sell during peaks,” Kraut said. “But you need to have the right infrastructure in place to do that, along with the appropriate vision in what you’re doing.”

Kraut believes that once people are allowed back to their offices in a meaningful capacity, the floodgates will open for the office market.

“This whole work at home experiment it at a point where it’s unacceptable to employers, who want their teams back in the office, and employees who want to come back as soon as possible,” Kraut said. “It’s become debilitating, people can’t grow their businesses without being in the office.”

The company focuses on deals of 150,000 or less on the office side and has carved out a niche in the city Midtown South submarket that is wants to grow aggressively.

“Most institutional funds don’t play sub-$100m,” Kraut said. “We have been actively buying during the pandemic. In New York, there is never a lot of office product on the market even in the market troughs. New York City office has historically bounced back quickly and we’re long on New York at a time when people either down on on the city or too scared to make a decision. But I’m confident that things are going to turn around. Things in New York are never as bad as people say they are.”

KPG Funds wants to be ready for what it believes will be a major recovery for the city’s office sector.

“My prediction is that in 2022, we will have the biggest leasing velocity in the history of New York,” Kraut said.

“The delta between the cost of living in Manhattan and other cities has shrunk so much that we will see a generational rebirth of New York,” Kraut said.

Kraut, who was a founding principal and managing director of Avison Young’s New York office prior to co-founding KPG Funds, has deep contacts in the city’s office market. His partner, Rod Kritsberg, is a former Midtown Equity executive who has a similarly deep rolodex.

Manhattan office product is often held on a generational basis by families or on a long-term basis by major institutional investors. KPG has deep connections with private owners in the city and can tackle deals in a number of ways, including joint ventures for value-added plans.

The company could also structure ground leases or buy assets incrementally from owners, he added.

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