Hartford Business Journal

8 Hartford Business Journal • July 23, 2018 • www.HartfordBusiness.com Reporter's Notebook Gregory Seay | gseay@HartfordBusiness.com Real Estate, Economic Development/Construction, Banking & Finance and Manufacturing FINANCE Ironwood Capital's $424M fundraise, its largest ever I n the world of business finance, banks, thrifts, credit unions and other asset-based lenders — all essentially investors — pre- dominate. But within that realm is a slender class of lenders-investors providing essential growth capital to relatively small, privately held busi- nesses in the form of mezzanine financing, a cross between debt and equity. Avon mezzanine investor Ironwood Capital has built an impressive book of such invest- ments in Connecticut and nationwide since its 1990 founding. According to Marc A. Reich, a former Aetna Inc. investments adviser/analyst who founded Ironwood, his firm over nearly three decades has invested more than $190 mil- lion in over 50 Con- necticut companies, among them Crom- well's Ripley Tools, Glastonbury's Health- trax Fitness & Well- ness Inc., and South Windsor aeroparts maker Capewell Com- ponents LLC. Of that total, Iron- wood's four mezzanine funds have invested about $90 million in 10 companies, Reich said. Its latest fund, IMF-IV launched in May 2017, so far has pumped just over $135 million into 11 companies, including $19 million to a pair of Connecticut firms. Ironwood's investments are spread across a broad range of companies, including manufac- turers, distributors and environmental firms. In June, it announced the addition of Ameri- can Residuals Group, through an unspecified investment in the expanding private Arkansas industrial-waste processor based in Dardanelle. Ironwood's model, he said, is to invest $8 mil- lion to $20 million in middle-market companies for non-controlling debt and/or equity stakes to support their growth. Typically, private-equity managers like Ironwood earn fees for managing the funds and identifying, analyzing and vetting investment prospects. It also shares with inves- tors in the funds' gains. Recently, Ironwood successfully raised $424 million for its fourth and largest fund yet — $24 million more than targeted — from banks, insurers and pension-fund investors that it will use to invest in midsize companies. Ironwood Mezzanine Fund IV is the successor to Ironwood Mezzanine Fund III, which in 2012 raised $307 million that Ironwood invested into about 20 companies, Reich said. In all, since Reich and partners bought in 1990 former life-property-casualty insurer Aetna's investment-banking subsidiary that Reich launched four years earlier, Ironwood has cre- ated four funds that have raised nearly $1 billion, much of that eventually being invested in more than 80 companies. Such junior lending is the life-blood, particular- ly for small but growing companies that cannot obtain or afford a bank loan and do not yet have a product, service or track-record viable enough to lure equity investors through a stock offering. Typically, junior or mezzanine financing, observers say, is cheaper and more readily ac- cessible than other commercial forms of financing. Reich is tight-lipped about his four funds' yield returns to inves- tors, citing federal se- curities rules against such boasting. "We've done it a long time,'' he said recently. "We've done it well from time to time.'' The goal, and part of the recipe for success in the mezzanine- financing realm, is identifying growing companies in which to invest to produce above-market returns for investors, Reich said. To do that, Reich and members of his 20-per- son team regularly get away from Connecticut, down South, or out West, in search of invest- ment opportunities. Places like Jackson, Miss., or Idaho, are outside the traditional capital bases of New York, Chicago and San Francisco. So Ironwood goes to those remote areas, hosting networking sessions/events, to introduce itself. "When you're investing in a company, you're really investing in the people. We try to iden- tify strong teams that are committed to the company,'' said Reich, a biking enthusiast who lives in Avon. The state Treasurer's office is among Iron- wood's satisfied investors. After investing $10 million of state funds with Ironwood in 2011, the office followed in May 2017 with $50 mil- lion from its mainstream retirement fund into Ironwood's newest and fourth fund, said Laurie Martin, the state treasurer's chief investment officer. Via email, Martin said a treasurer's office analysis "indicates that Ironwood Capital is an effective investment partner. The successful closing of its largest growth investment fund to date shows that other institutional investors have come to the same conclusion." DEAL WATCH Newington commercial condo sold at $2.1M A 9,670-square-foot Newington commercial condominium sold recently for $2.095 million, brokers say. Nickerson Properties LLC bought 445 and 445A Willard Ave. from seller Rotundo Developers LLC. The property is fully leased to DaVita Dialysis and Family Adult Day Care. Colliers International was the seller's broker. $800K Cromwell sale An 8,000-square-foot Cromwell professional building sold for $800,000. Montgomery Development Group LLC acquired the property at 26 Shunpike Road from Shunpike Associates, according to sole broker Colliers International. Farmington's Talcott Center relo The Talcott Center for Child Development (TCCD) has relocated its Farmington quarters from the shadow of UConn Health to the Bridge Healing Arts Center in town, on Main Street. TCCD, a comprehensive, privately owned therapy center for children with special needs and their families, relocated to 304 Main St. from Talcott Plaza, 230 Farmington Ave. Sentry Commercial was sole lease broker. Landlord Yisroel Rabinowitz acquired 304 Main, former home to advertising/ marketing agency Keiler & Co., renovating and rechristening it as the Bridge Healing Arts Center. Rabinowitz has positioned the center as a holistic health center that includes naturopaths, energy healers, acupuncturists, yoga instructors, massage therapists, nutritionists and others under one roof. Bristol land sale A strip of Bristol land fronting ESPN's administrative building has sold for $150,000. WE 383 Middle St. LLC, an affiliate of Massachusetts developer Winstanley Enterprises, sold the 9.43- acre parcel to buyer Robert Demarais, according to seller's broker Colliers International. The parcel is adjacent to a 370,000- square-foot office building housing ESPN's administrative offices. Advance Realty represented the buyer. $155K Hartford sale A 4,400-square-foot building in Hartford's North End recently sold for $155,000. SST Associates sold the building at 140 Albany Ave. to Insik Jun, according to sole broker Colliers International. Ironwood Capital Chairman and CEO Marc A. Reich meeting with interns. PHOTO | CONTRIBUTED 445-445A Willard Ave., Newington. PHOTOS | CONTRIBUTED Bridge Healing Arts Center, 304 Main St., Farmington.

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