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Joe Beninati doesn’t like to lose. Last December, the 43-year-old cofounder of Greenwich, Connecticut–based private-equity/real-estate fund manager Antares Investment Partners found out that UST Inc., the holding company for U.S. Smokeless Tobacco, was selling its headquarters — a piece of class-A Greenwich commercial property. He immediately mobilized his entire team. The hometown property had to be theirs, he vowed.
He’d do plenty of due diligence, of course, but because Beninati is in the middle of most major real-estate deals in pricey Greenwich, he knew exactly what kind of offer the building would command. More importantly, he knew all this before most of
his competitors could even begin to do their homework. He played a key networking card, too — both he and UST CEO Murray Kessler were part of the local chapter of the Young Presidents Organization. "He came in strong," Kessler says.
But that’s always been Beninati’s style. A former college football player who started his firm five years ago, he says of the UST deal: "Our goal was to make sure our offer led to a closing that would take place at an alarming rate."
Antares has $5 billion in assets under management, including $1.6 billion in a private-equity fund, Antares Fund One, which started in 2006 with seed money from Goldman Sachs, among others.The fund focuses on investing in properties with hidden value. It looks for leases that are about to expire and buildings in need of capital improvements, then unlocks their value.
When Kessler, in his capacity as president and COO, was tasked with helping revive UST in 2006, he too was looking to unlock value. As part of an initiative known as "Project Momentum," Kessler and his fellow managers last summer set a goal to remove more than $100 million of costs from UST’s balance sheet. Selling the Greenwich headquarters was a big first step in their drive toward cost efficiencies.
In a city known for back-nine dealmaking within the walls of the world’s most exclusive country clubs, this deal, a battle for a prized piece of Greenwich, took on a who-knows-whom-better life of its own. UST received 25 offers, from the likes of Blackstone and RFR, the first day alone.
Antares eventually won, with a bid for $130 million and a sweetener no one saw coming. Beninati and Kessler recently agreed to sit down and recount their buy-and-sell experience.
MURRAY KESSLER: We started something internally called Project Momentum. The goal was to find ways to increase the company’s competitiveness. We were looking at trying to evolve the business model. We’d grown too dependent on price increases to increase profitability. We needed to put more tools in the toolbox. Basically, we said to ourselves, "Let’s put everything out on the parking lot and let it earn its way back into the building."
In this case, though, we realized quickly that perhaps the building had to go. As a consumer-goods company, we were about creating value for our shareholders. Being in the most prestigious building in Connecticut didn’t fit.
This was July 2006. We announced publicly that we wanted to take out $100 million in cost. That September, at an investor conference, it was made public that our building could be sold, so we began to look for a new headquarters.
JOE BENINATI: Antares had done its research; we were well aware that the building sale was a critical part of the UST restructuring plan with Project Momentum, so we knew that certainty of close and speed were going to be important. We don’t feel like a big deal is going to happen in Greenwich unless we’re in the middle of it. Immediately, we were in tune with the idea of how we could give Murray Kessler and his board their turnkey solution — a way for them to be assured they’d close at the highest possible price and without having to take any risk.
KESSLER: The official listing wasn’t done until December. But even before that, Joe was trying to find a shortcut.
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