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Returning home on a quest with strong financial backing

Nick Sinatra is bullish on his hometown, and he’s putting big-name wealth behind it.

After spending several years as a Republican political operative at the state and federal levels, the Buffalo native is making his mark by pursuing his real passion: real estate investing.

Since bursting onto the local scene four years ago, he’s snapped up multi-family and retail properties in North Buffalo, Kenmore and Tonawanda, in familiar neighborhoods near his family’s Italian restaurant. More recently, he purchased a portfolio of residential buildings in the Elmwood Village area from a group called Barons of Buffalo, and then moved over to Main Street with his Fenton Village apartment complex at Main and West Ferry streets.

Sinatra has also bought distressed single-family homes in Southern California communities in the Los Angeles, San Diego and Orange County areas. Last summer, he struck a deal with Wall Street investment firm Colony Capital, which invested $45 million in his California home-buying and flipping efforts, putting Sinatra in competition with Wall Street’s Blackstone Group. So far he has bought, renovated and sold 50 homes in California, with 25 more pending and plans for 20 to 30 more a year for four years.

But his primary focus remains Western New York, where he just agreed to buy the Market Arcade Building on Main Street in downtown Buffalo as his new headquarters.

Jonathan D. Epstein: How did you get started in politics and then real estate?

Nick Sinatra: I’ve always wanted to do real estate. When I was in college, I was a political science major and got the political bug at Yale. But I wanted to go and work in real estate finance. I had a job lined up to go work at UBS in the real estate finance analyst program.

[Former New York] Gov. [George] Pataki is a Yale graduate. I became close with his family because his son played on the football team with me. I was the only other person on the team from New York other than his son, and so we became friendly.

He said if I wanted to come work in the governor’s office while his father was governor, now’s your opportunity. So I did.

My first job working for the state was $35,000, where I would have made triple that working on Wall Street. So I worked with him for a little under a year, in Buffalo, at Empire State Development.

Then I took another pay cut to work for the Bush campaign as a campaign staffer for $25,000. This was 2003-2004, when the Bush re-election campaign was going on. This was so exciting to me. They put me in Erie, Pennsylvania, because it was the closest place to Buffalo that was a swing state. Then they transferred me to Harrisburg. When they won, they recommended me to Karl Rove for a job.

JE: So how did you get back into real estate?

NS: The administration was wrapping up. It was time to reinvest in myself. I went to Wharton [business school], whose real estate program is the best.

I showed up in Philadelphia, and then Lehman Brothers collapsed the next day [in September 2008]. The world caved in.

I said to myself, there’s an opportunity. The market’s overreacting. I was always good at raising money. In politics, you have to be good at raising money. I had a great Rolodex from my time at the White House, so I put together a business plan almost immediately when I got into business school.

Raising money is difficult and takes a lot of time. I must have asked 50 people, and they said I was crazy. Nobody wanted to invest in real estate. Then I asked Michael Vlock, who is married to Karen Pritzker. The two of them run the Pritzker/Vlock family office, which is a $3.5 billion family office, of the Hyatt [hotel] fortune. Karen’s grandfather started Hyatt.

JE: How did you manage that connection?

NS: I’d gotten to know them during my time at the White House. So I walked into Michael Vlock’s house, with my business plan, and I started giving the pitch that I had given to 50 previous people. He didn’t even look at the book, but asked me how much I’d want. I had in the plan $50,000 as an investment.

“I’m not going to do that,” he said. I started to pack up my things. “I’m going to give you $100,000. Who do I make the check out to?” And he pulled out his checkbook.

He shook my hand, and said send me the legal paperwork. He said as long as you run the business with integrity and treat us with respect, we’ll have a long and fruitful relationship for many, many years.

A year later, I brought him back the $100,000, with interest. He wrote a bigger check, followed by a bigger check and a bigger check. As of now, he’s invested $50 million, between here and California. He’s been enormously supportive.

JE: Why was it so hard to get other backers?

NS: The marketplace was horrible, and people were scared. Nobody wanted to invest in Buffalo. You talk to institutional investors in New York, Philadelphia, Boston and elsewhere, and you mention to them you’re going to start a company in Buffalo, and they laugh.

That’s the type of wrong-headed mentality some of these folks have. They believe that unless you’re investing in New York or L.A. or Washington, you’re kind of wasting your time, which is really just wrong.

You can make money in real estate in almost any market, but certainly in this community. Even before everything that’s gone on in the last five years, you can still do well here, and people have proven it.

JE: So why were Vlock and Pritzker interested?

NS: They were interested in me. They invest in people, so I could have told him that we were going to go anywhere in the country, and he would have been fine with it. That’s what he does. He takes risks and invests in people, and he had a gut feeling about me, and he saw me and how I operated in Washington with him and with others that he has contact with.

My view was here’s why I’m investing in Buffalo. It’s a community I’m very passionate about. I know it, at least better than I know any other community in the country. And there’s stuff happening here. So let’s start in a position of strength in a community that I know and can lead into, as opposed to a community that I don’t know.

I’ve got this incredible opportunity with this family office, and I’m not about to screw it up by taking outsized risks. It’s not necessary, and so I shepherd that relationship very closely.

JE: What made you want to come back to Buffalo?

NS: Buffalo has so many big-city attributes but it has the small-town feel. It has this Midwestern feel. It’s more like Chicago than New York. You talk to people that have left Buffalo, and they want to come back because of the people. It’s hard to build friendships and relationships in those big cities, because they’re so transient. They don’t care about each other as much as people do around here.

It’s one of the reasons that I came back. It’s one of the reasons that others in my office came back. There’s a sense of community and a sense of pride, and now that there’s so much going on, there’s excitement, too.

JE: How many properties do you own here?

NS: Probably 50 or so buildings, but some are very small. When we first started, we were buying four-units and doubles and then moved up the property food chain. Now, we have almost 500 units and 400,000 square feet of commercial space.

In California, we do distressed single-family homes. It’s similar in that we’re in highly desirable neighborhoods and we’re taking down old homes or renovating old homes and making them gorgeous. But there we sell them.

JE: What’s your focus?

NS: We do historic renovation projects. We try to be very sensitive to restoration and preservation of the beauty that is Buffalo in terms of our architecture here. It’s something that differentiates us from a lot of other cities in the country.

We’re really big on community redevelopment as a company. It’s in the DNA.

We believe in adding value through operations, through construction, through better management, through thick and thin, through ups and downs of real estate cycles. The best operators survive, and that’s what we are.

JE: Why start in Kenmore, Tonawanda and North Buffalo?

NS: Because that’s where we could get in initially. We didn’t have a whole lot of capital when we first started... We had to grow into being investors downtown by starting in Kenmore.

We were looking for the better part of a year to be downtown. If you’re in the real estate business, you’ve got to own the property to make a statement.

I’m so excited about this [Market Arcade] building, that we’re going to be in it. This building needed a shot in the arm, and by us moving our offices in there, it’s a shot in the arm.

We’re a young, growing, entrepreneurial kind of cutting-edge company and that’s the type of theme that we wanted to put over this building. There’s already some tenants that have that same sort of feel to it, so we’re accretive to that and hopefully others will follow us.

JE: Is the multi-family real estate market healthy?

NS: The residential space is red-hot, and I don’t see it slowing down anytime soon, especially if you can deliver a new or renovated product. For so long, people have just gotten used to living in “B” product in the city, because nobody wanted to invest and there wasn’t an incentive to invest in these apartments. Now you can provide a different quality product and there are literally waiting lists.

If we have an apartment that’s ready and it’s in the City of Buffalo, it rents. If it’s in North Buffalo, in Elmwood Village, it rents very quickly. The rental market is really strong.

JE: So, is Buffalo back?

NS: It’s coming back. It’s on the right path. It’s been 30 years in the making. A lot of folks have been pushing the elephant up the hill for a long time, and finally there are some positive benefits going on. You can feel it. It’s palpable. You can taste it almost. People are walking around with a sense of optimism and an extra little bounce in their step because they’re really excited about what’s going on in the community, for the first time in a while.