By Adam Kietz ’20
Neville Rhone is Co-Founder and Managing Partner of Arc Capital Partners. Arc focuses on creating exciting urban mixed-use environments that resonate with the younger generation. Along with Quincy Allen, he is responsible for overall firm strategy, investments, asset management, financing and dispositions. Arc recently formed ArcWest Partners with the California State Teachers Retirement System (CalSTRS) and Belay to acquire and reposition over $400 million of urban real estate in the western region of the U.S.
Neville is a 25-year veteran of real estate development, finance and investing with over $6 billion of transaction experience. Prior to forming Arc Capital Partners, Neville was a Managing Director and investment committee member of Canyon Partners Real Estate (“Canyon”). At Canyon, Neville led Texas/Southeast acquisitions and invested in over $1 billion of properties. Prior to joining Canyon, he was a Vice President at Morgan Stanley focused on real estate investing. Prior to joining Morgan Stanley, Neville was a senior development executive with Tishman Realty Corporation, a leading mixed-use developer and operator located in New York City.
Neville is an active member of the Urban Land Institute, Pension Real Estate Association and the International Council of Shopping Centers. He is also a trustee of the Marlborough School and board member of the Economic Resources Corporation.
Neville graduated from Cornell University with both a Bachelor of Science and Master of Engineering (Civil Engineering) and holds an MBA from Columbia Business School. Neville is also an avid triathlete and marathoner.
What first attracted you to real estate?
I have always had an affinity for the physical impact of design and real estate. I pursued this early on in my academic career as an undergraduate at Cornell and throughout my master’s programs in Engineering and at Columbia Business School. I started my professional career in construction management and had incredible experiences, particularly my time with Tishman. I also really enjoy building and fostering relationships with the different stakeholders that I work with on any project.
Many CBS students are drawn to real estate with long-term entrepreneurial aspirations, tell me about your decision to leave Canyon for Arc and what were your considerations and the challenges you faced?
Stepping back a few years, my first exposure to the entrepreneurial aspects of real estate came through a community service project I managed in my undergraduate years at Cornell—a revitalization of a playground in a local community. The playground served a community need and I worked with many stakeholders—we raised money, worked with an architect, recruited volunteers, designed and built the structure, and collaborated with the city to bring the project to fruition.
Fast forward about twenty years later—after my early entrepreneurial experience at Cornell, the additional academic exposure at Columbia Business School, my time in capital markets at Morgan Stanley, and ultimately my investment strategy Canyon—the time was right to form Arc Capital Partners. My partners and I focused on three compelling factors when we spun out: (1) urban mixed-use environments were less volatile and recovered more quickly than other sectors through the downturn due to the secular generational trend of young people staying in cities and deferring the dream of the “white picket fence,” (2) significant value could be added by rolling up our sleeves to execute creatively at the asset level while challenging the legacy business plans of traditional real estate owners, and (3) large, high profile deals are extremely competitive among larger funds making it much tougher to achieve high risk-adjusted returns relative to the more fragmented middle-market space.
With these factors in mind, we took a leap of faith. We did not have our investors lined up, no deals we were ready to execute, and no terms in place. However, what we did have was a set of experienced partners with a very like-minded value investor mindset—so in some senses we were a start-up but in name only given our backgrounds. The relationships we had built over our decades of experience turned out to be invaluable in the early days of Arc’s existence.
At Arc, you have been able to successfully reposition traditional retail assets that have been struggling in today’s market, what is your strategy and how do you feel it differentiates you from competitors?
We try not to paint everything with a broad brush—not all retail is the same. Retail can be a class C mall in the suburbs, a new Amazon experience store, or a Michelin star restaurant in downtown Manhattan. We focus on “experiential” retail and generally pursue one of three categories—food, fitness, or fun. Despite the millennial stigmas, we think the younger generation of people still like to be around each other and feed off the energy that comes from being together. Our projects contain some component of creating an environment where people want to be and want to congregate—often that means including a good meal.
Arc also has a hand in value-add multifamily projects—how do you feel about the trend towards co-living spaces? How are you positioning your assets and are you considering partnering with the likes of Common?
Our feeling is that this trend is here to stay— though what form it may take over the coming years will continue to evolve. More specifically, in our projects we are borrowing concepts like creating more community-based event and amenity spaces in our properties, as well as creating a more social atmosphere for our tenants in their homes. This has been a shift away from the more traditional approach to the value-add multifamily game plan—the money that formerly went solely to updating countertops and appliances can be redirected to public amenities like a dog park or a roof deck and be more accretive. We have not done anything purely co-living, but we do focus on multifamily with more efficiently sized units with fewer bedrooms.
How do you balance your need to be thoughtful around your investment thesis when looking at a transaction with the need to move and execute quickly given the competition in today’s market?
We are (by design) very localized to California and Texas. Within those markets, we also have targeted micro-markets, and within that we know which neighborhoods we want to be in within those submarkets. This makes it much more straightforward for us to consider opportunities as we filter through them. For example, we already know which multifamily markets we like for young people in Austin, so when an opportunity comes across we can focus on the asset and pricing specifically as our thesis is in place. Also, given our typical transaction size, our deals tend to be privately negotiated as opposed to a larger auction process, which gives us a bit more time to have our team do the upfront work and those conversations take place.
Looking back at your time at CBS, what do you feel has carried with you as the most valuable part of your experience and share any advice you have for current CBS students.
I told myself I wouldn’t be cliché in our conversation but you know what comes to mind—the relationships I formed at Columbia Business School are phenomenal. I have no doubt many of my contemporaries feel the same, so my advice to current students would be to get involved with your classmates, your cluster, and form relationships because you’ll stay in touch with these people long down the road.
I also enjoyed exposure to the disciplines I had not fully explored earlier in my academic or professional career like value investing, finance and accounting. I took advantage of my time with Columbia’s faculty and still maintain some of those relationships as well, such as mine with Professor Chris Mayer.
What do you like to do when you’re not working?
Good question—outside of trying to be the best father I can be, every year I train and compete in either a triathlon or a marathon. I like to give back to the community at my children’s school and am involved with a non-profit focused on economic development called the Economic Resources Corporation. Also, I haven’t had the time yet, but down the road I plan for my passion for art to bring me back into that world in some way.
Thank you very much, Neville.
Adam Kietz ’20 is a member of the Columbia Business School Class of 2020 focusing on Real Estate Finance. During his time at Columbia, Adam has been a Vice President of the Real Estate Association and spent time working with Aspen Capital and Format Real Estate Ventures. In the summer of 2019, Adam will be working at Related Fund Management, a private equity group within The Related Companies. Prior to CBS, Adam was part of a financial advisory group at J.P. Morgan Securities which oversaw $1.5 billion in assets for individual and institutional clients. The group focused on due diligence and capital raising for real estate and other private investment structures. Adam had 6 years of experience in asset management at J.P. Morgan and is a CFA Charter holder. He is originally from New York and currently lives in Chelsea in NYC.