In this episode of The Distribution by Juniper Square, Brandon Sedloff interviewed Todd Rich, Co-Founder and Head of Real Estate at Declaration Partners LP, with approximately $2.2 billion in AUM. Anchored by the family office of Carlyle co-founder and philanthropist David M. Rubenstein, Declaration was founded in 2017 and invests on behalf of family offices and like-minded institutional investors in tactical growth equity, real estate, GP solutions, and other opportunistic strategies.
The two discussed how Rich’s keen entrepreneurial sense led him to opportunities in family wealth, starting with a partnership with David Rubenstein’s family office. They also explored Rich’s “declaration” of purpose and philosophy of partnership.
Being flexible enables family capital to avoid competing with institutional capital.
Rich had always aspired to be a “full real estate professional,” skilled in both operations and investment. After the successful 2019 IPO of his Washington DC-based real estate investment company JBG Smith Properties (NYSE: JBGS), Rich approached billionaire and PE investor David Rubenstein at what turned out to be a propitious moment, and Declaration Partners was born.
“I view family investing as periodic, high-conviction investing,” said Rich. “Families are not trying to meet certain liabilities. They don’t have a specific timeline. As a result, they can be very flexible and they can wait until they have real conviction, and then they deploy. And when they deploy, it doesn’t need to fit some box that a consultant signed up for.” That flexibility can spell opportunity: “Being flexible enables family capital to avoid competing with institutional capital when trying to find deals.”
Rich foresees an exciting future for private investments among individuals and families. “I think the family office and RIA channels will continue to grow, potentially much quicker than the world of institutional capital,” noted Rich. “There's a movement towards allocating more to private investments to create diversification benefits, decreasing beta, increasing alpha, and ultimately get better long-term returns.” He also sees “untapped opportunity to create a network [of family offices] who help each other.”
There is no such thing as a part-time entrepreneur…the only way to really understand is by doing.
Rich’s family story is a classic American tale. “My grandfather started his own firm, my father started his own firm,” stated Rich. “I really believed in and still believe in the romantic power of entrepreneurialism. And I wanted to experience that.”
With an investment strategy undergirded by operational expertise, Rich has become the “full real estate professional” he’d aspired to. As Rich put it: “[As a family office investor] we have the ability—and we think this is important—to hold individual assets a long time and do it in a manner that is consistent with what our investors want.” Currently the portfolio is concentrated in multi-family housing, industrial logistics, and self-storage.
Rich has two framed quotes in his office. “One is Charlie Munger who says: the first rule of compounding is to not interrupt it unnecessarily. Just below that, I have a quote from Bernard Baruch, who said: nobody ever went broke taking a profit too early,” Rich continued. “Obviously those concepts are opposites. But they're the right bookends.” The flexibility of managing family capital means Rich and his team can assess deals opportunistically. Their mandate for long-term, compounding, tax-sensitive returns never changes, but the best deals on the ground can and often do.
Do good, do well, have fun.
Declaration Partners takes its name from Rubenstein’s enthusiasm for America’s history and future. Rubenstein has pledged to give away all his wealth in his lifetime to “patriotic philanthropy,” which Rich explained as “trying to improve our country, to remember our history and to make it a better place.”
“In my view, the Declaration is both a foundational and an aspirational document,” said Rich. “It asks us to think about what type of country or citizen we might want to be. And that's a great combination when starting your own firm, right?” Rich’s own “declaration” is “Do good, do well, have fun.” He explained: “We're all here for a purpose that's greater than financial gain….We won't get the opportunity to do good unless we do well. We want to succeed financially; we want our investors to succeed financially. There's a sense of pride with that.” As for having fun, Rich remarked: “We're only on this planet for a brief moment, and we may as well enjoy it.”
Rich’s values extend to the investment partners he seeks, noting that his best partners “have high integrity, high talent, and high capability at finding properties that are worth investing in.” He quotes the late David Swensen, legendary leader of Yale’s investment office and one of Rich’s former LPs at JBG: “The best legal agreements cannot protect you from a bad partner, but the best partners can protect you from a bad legal agreement.”