Opportunities Increase for Alternative Capital Sources

Even with the economic landscape uncertain, flexibly structured, long-duration capital is available for quality companies. At the 20th annual BMO Farm to Market | Chemicals Conference in New York, I moderated a panel discussion on how alternative capital providers in the food, beverage and retail space are working hard to build long-term relationships with those companies. Our panelists were: 

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  Kayvan Heravi, Managing Director, Sixth Street 

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  Alexi Panagiotakopoulos, Partner and Chief Investment Officer, Fundamental Income 

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  Diana Propper de Callejon, Managing Director, Cranemere 

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  Patrick Sissman, Partner, Redwood Holdings 

The speakers shared their perspectives on family offices, hybrid capital and real estate sale leasebacks. A summary of our discussion follows. 

The panelists noted that developing relationships before a deal is ready is essential to executing transactions quickly and maintaining smooth relationships after the deal closes. 

Heravi, who leads Sixth Street’s dedicated Consumer Investing Business as Co-Head of Consumer, said relationship building is what enabled Sixth Street to stand out in the auction process to acquire a leading U.K. restaurant franchise. “We spent a lot of time cultivating a relationship, not just with the advisers who traffic in those businesses, but also with the franchisor,” he said. “Because we had positioned ourselves as a preferred partner for the brand, they knew us, they trusted us.” 

The current economic and market volatility is on everyone’s minds. For investors like Fundamental Income, taking the long view is crucial. 

“At the end of the day, you try to find steady hands,” Panagiotakopoulos said. “Because we’re investing in these properties with 20- to 25-year terms, we may own a property longer than a business owner owns a business. We're very long-term oriented, and that allows us to weather storms.” 

Similarly, Propper de Callejon said Cranemere focuses on founder- and family-owned businesses with a long and proven track record. “For us, we’re looking for great companies that have strong cash flow and have been able to demonstrate their resiliency through all the ups and downs of the market,” she said. 

Because Fundamental Income specializes in real estate sale leasebacks, Panagiotakopoulos said the firm has some constraints when it comes to structuring, but that affords it the opportunity to develop creative solutions.  

“We take a lot of pride in creating bespoke situations and being as innovative as possible,” he said. “For us, we have to understand who the owner of the business is. We try to be as thoughtful as possible.” 

Family offices tend to operate differently from other investors. That’s why relationship building continues well after a deal closes. 

“We’ll get together a couple of times a year to talk about the business,” Sissman said. “We want to get involved in big capital allocation decisions because we can be helpful there, since that’s the world we live in. And we want to build that relationship because, inevitably, issues will arise, and you’re not going to be able to work through them unless you have that trust built up over time.”