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January 17, 2007 As HEDGE FUNDS have flooded this affluent community in recent years, Joseph Beninati and James P. Cabrera have placed some winning bets on the local real-estate market. Messrs. Beninati and Cabrera co-founded Antares Investment Partners, which has profited handsomely by turning a ho-hum office building in downtown Greenwich into sleek office space for prestigious financial companies and private-equity firms. Antares also helped transform the Delamar hotel- which replaced a run-down motor lodge-into a popular place for money managers to entertain their investors, some of whom commute there by yachts that they dock alongside the hotel. Now, Antares is embarking on what some consider one of its boldest and riskiest projects. At a time when big home builders across the country are cutting back, Antares is proceeding with plans to construct a handful of mansions, the largest of which will include roughly 41,000 square feet of space spanning several buildings and cost about $25 million. That mega-mansion is being built off Round Hill Road, an area that includes many other opulent houses, and some of the other houses are being built off Taconic Road in Greenwich. What could make the development risky is that Antares is putting up the homes on spec, meaning they currently don't have buyers. Typically, such massive homes are built from the ground up by people who buy the land, hire an architect and developer and build the house of their dreams to their exact specifications. Increasingly, that process is being stymied in wealthy communities by residents who balk at the swelling size of homes and try to block their construction. Last winter, Joseph Jacobs, president of Wexford Capital, which manages several hedge funds and private equity funds, withdrew his plans to build a house with nearly 39,000 square feet of living space in Greenwich after attracting lots of publicity over neighborhood complaints that his house would be just too big, according to newspaper accounts. Mr. Jacobs declined to comment through a spokesman. "It's more and more time consuming to develop a piece of property in Greenwich," says John Tesei, a lawyer who has focused on land use in Greenwich for 30 years. 'You see greater regulatory involvement, and greater 'scrutiny'-to be polite-by abutting property owners." Even when massive mansions aren't rejected outright, it can take more than three years to build a large home due to strict oversight of development from Greenwich's government boards. Large spec homes face similar scrutiny. Antares's strategy is that it will fight the battles and get the approvals so that the home buyer can avoid the hassle. Antares started preparing for the mansions four years ago, when it assembled 50 acres of land around Greenwich, readied the properties for development and worked through the planning and zoning boards to obtain approval for the large homes. "Going through the approvals wasn't any fun," Mr. Beninati says. "A hedge-fund guy doesn't want to deal with this!" Antares is betting that there are enough rich people in a hurry who would gladly give up the satisfaction of building their own home in exchange for the ease and speed of moving into an already built home. Mr. Beninati says Antares is providing most of the equity, and is using relatively little debt, to develop the mansions. Antares is a private-equity and development firm that manages real estate, renovates the buildings, builds them, finds tenants and invests its own equity. The company has about $4.5 billion in assets under management and projects under development; its properties are located in Connecticut and New York. While other private-equity firms also manage their real-estate investments, Antares, as a relatively small firm, is unusual because it is involved in so many different types of real estate, from offices to high-end homes. "Most groups will be in either office, hotel or multifamily," says Charlie Schoenherr, a managing director at Lehman Brothers, which provided financing for two of Antares' projects in Greenwich. "They invest in various different property types within a certain region. They are more regionally focused than focused on one property type. We like the whole Fairfield market with Greenwich as the epicenter. They are the most dominant firm in that market and we think that is a good strategy." Mr. Beninati and Mr. Cabrera and other Antares executives own the majority of the company. Mr. Beninati says that investors in its projects include the private equity firms Arch Street Capital Advisors LLC and Lubert Adler, which invest capital from university endowments. Most of the mansions come with finished interiors, but the company is taking an unusual approaching selling its largest home where the main building spans 35,000 square feet. Antares built the stone exterior, but will leave the interior design-moldings, floors, bathroom and kitchen fixtures- to the buyer once they purchase the home. Antares believes this approach lets high-end buyers make the kinds of decisions about their living spaces they usually care most about. There is little doubt the market for high-end homes in Greenwich is strong. The median price of a single-family home through the third quarter of 2006 was about $1.94 million, up from a median price of roughly $1.55 million in 2004, according to David Ogilvy & Associates, which sells high-end Greenwich homes. Last year, eight homes sold for more than $10 million, said the firm's president, David Ogilvy. The risk for Antares and its largest mansion-which the company dubbed the Lake Carrington estate-is that affluent buyers in that high price range will want to design the entire house themselves. It also could prove difficult to sell such a large house that has very little on the inside. "It's unheard of," says Mr. Ogilvy "People want to see the home done. They might want to change it all, but they want to see it done." One of Antares' mansions-a 17,000 square foot home-is on the market for $10.9 million. Lake Carrington will go on the market next month and a third mansion will hit the market in March. Mr. Beninati and Mr. Cabrera, who are friends from prep school and who grew up in and around Greenwich, founded the firm in 1996. It started out investing in engineering companies and real estate, but began focusing almost entirely on the latter in 2002. 'We saw Greenwich turn into a town where everyone commuted to New York City to a place where they both live and work," Mr. Cabrera said. The company founders say they got their big break in the late 1990's when they brokered a deal to move hedge-fund manager Paul Tudor Jones into his current Greenwich headquarters-a former mansion previously occupied by Tenneco, an oil company. In June 2002, Antares bought a stake in a 240,000-square-foot office plaza-called Pickwick Plaza-in downtown Greenwich, which sold for $120 million. At the time, it was the highest price ever paid for a suburban office property and all the leases were up for renewal. Antares, which managed and renovated the property, planned to more than double the rents, which were as low as $30 a square foot. Antares says it was able to raise the rents to more than $100 a square foot. The company and its partners recently sold the property for roughly $235 million. Whether Antares will enjoy the same success with its aggressive push into Greenwich's housing market remains to be seen. Last February, it bought a worn out 466-unit apartment complex in Greenwich for $223 million. Antares has spent another $125 million on massive renovations, as it turns many of the units into forsale condos. Antares has deposits on 40 units and several investors who are interested in buying a block of 120 units. Antares says it expects to close on many of the units this spring. The condos start at $487,000 for a one-bedroom 750-square-foot unit and are geared to the young traders, analysts and other young people or empty nesters looking for a piece of Greenwich. Antares also is expanding into Stamford, redeveloping 80 acres of former industrial sites on the waterfront into office space geared to financial companies, condominiums and a marina. The $3.8 billion project is years away from completion, but the company is betting that the hedge-fund economy will keep expanding. "How do you take Greenwich and expand it?" Mr. Beninati says. "Right next door is the Stamford waterfront!"
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