When it comes to making the case for alternative forms of investing, Jeff Sica has his own version of an elevator pitch.
“I give people the analogy: If you went up to an elevator and there’s an up button and a down button, you’d press up or down,” he said. “But if there was a surge button and plunge button, you would not get on that elevator.
“That’s what the market is. There are people out there that are dazed and confused and nauseous because they wake up in the morning and the market is up 2 percent. They get ready to go home for work, the market is down. It’s a level of unpredictability and volatility that investors are going to get very tired of very soon.”
Sica, 48, can speak from more than two decades of experience. He is a former investment adviser and management director for Wells Fargo and two predecessor firms, going back to Wachovia Securities and A.G. Edwards & Sons Inc. before that.
But as someone who has seen the ebbs and flows of traditional forms of investments such as stocks and bonds, Sica is now touting real estate as an attractive, sensible alternative that many people simply don’t understand. It’s one of the underpinnings of his Morristown-based firm, Circle Squared Alternative Investments, which he launched in 2014 as an offshoot of his then 4-year-old wealth management business.
He has since established Circle Squared by partnering with esteemed developers such as The Hampshire Cos., leading to opportunities in new mixed-use development projects in transit hubs such as Westfield and Harrison.
“I’ve been through crashes, I’ve been through — you name it — in the last couple decades. And people like to own real, hard assets — things that they can touch, see, feel, that they can drive past, that they can walk through.
“They like that. And I like that, and I developed a love for real estate long before I developed a business around real estate. So Circle Squared evolved out of the desire to bring real estate to our clients.”
To talk more about his firm and business model, Sica sat down recently with NJBIZ.
NJBIZ: Let’s start with the basics. Explain your role with a company like Hampshire and how that relationship developed.
Jeff Sica: I have been an adviser, a wealth manager, for basically all of my adult life. And what I found was that there were very specific types of investments that investors could invest in, and mostly that was stocks and bonds. What I saw was that investors had a greater appetite for more … and I saw that the most successful investors were interested in looking at alternative investments — and, more specifically, real estate.
So my alignment with Hampshire had everything to do with, not just all of a sudden coming out of that world and becoming an expert in real estate — that takes time — but affiliating with people who already had decades of experience and success in real estate. And I went right to who I consider the very best, which was Hampshire, and I said, ‘This is what I’m thinking of doing. Does this make sense to explore for your company?’ That’s how we developed the relationship.
When I left Wells Fargo in 2010 and started Sica Wealth Management, it was not necessarily on a temporary basis, but I knew I really wanted to focus and move toward alternative investments. (So) it’s really not the focal point of what we’re doing right now. The real estate has become a really significant part of our day-to-day.
NJBIZ: So, after spending a few years developing this relationship, you feel like you’re ready to fill a void in the marketplace. Why is that?
JS: It has taken a while because there has always been this divide between companies like Hampshire and investors. Investors didn’t really have full access to real estate products, and to build that bridge took an awful lot of time and an awful lot of effort, because it’s not a normal direction for people to go. Here, we looked at real estate, and … I would say a good percentage of top investors are real estate investors. So the fact is that a lot of the investors that the wealth management community … didn’t have any way to bring these strategies to their clients, and we sought to build a bridge.
And it’s a challenge because most advisers are pretty much stuck in what’s called the traditional or modern portfolio theory. … So they avoid not only real estate, but they avoid alternatives altogether. And when they do invest in real estate, they invest in things like REITs and things that I don’t consider real estate — I consider them correlated with the stock market.
NJBIZ: Who are your investors?
JS: Our clients are family offices (private firms that manage just about everything for wealthy families). We have a number of family offices and registered investment firms, wealth management firms — those are our clients. So we’ve been really zeroed in on doing a lot of research and heavily involved in understanding what they need. And what we’ve found is that we’re bringing not only real estate, but alternative investment to advisers that — most of them don’t really have a grasp of the potential.
NJBIZ: So your clients are mostly other consultants whose clients are the investors?
JS: Mostly. I have families and family offices as clients. I do have a handful of individuals that I kept. But the theory was that, if we were going to develop this brand, I did not want to compete with the wealth managers. They run their businesses, they’re very independent. We work with mostly independent wealth managers. I didn’t want them to think that I’m going to compete with them for clients, so they’ve become my clients.
NJBIZ: That makes sense. Can you talk more about what family offices are looking for and why that makes sense with your platform?
JS: They’re looking for marquee deals, they’re looking for strong affiliations — what we would call club deals, club deals being that there’s co-investment. What I like about the real estate that we do, the investors need to know that the sponsors, the people who are running the project, are investors with them. And I like that idea, because every investment has risk, and if you’re going to be invested in something, I like the idea that you have this alignment of interests, because we want to know that there’s skin in the game. We want to know that the sponsors are in it, they want it to succeed, they’re motivated. And we bring in other investors in as more of a partnership.
NJBIZ: With Hampshire, you now have a 70-unit, mixed-use project in Westfield that’s under construction and a 104-unit complex in Harrison that opened last fall. Tell me what you like about those projects.
JS: What I like about Westfield is it’s the first transit-oriented project (of its kind in the town). With Westfield, it’s this incredible town, right on a rail line, in a town that hasn’t approved of this type of development in decades. To get an opportunity like that, in a town like Westfield that desperately needed apartments — and to have a (co-developer) in Claremont that’s doing the construction — to me, if we had every deal like that we would be extremely happy.
With Harrison, I brought both the developer, CrownPoint, and Hampshire together. So I was in the middle of bringing them together. You have this dynamic going on in New York, where you have so many people working in New York, and then you have Jersey City and Hoboken getting so expensive for people to live. CrownPoint was able to bring us deal, which is walking distance to transit.
That particular deal — I think we’re 50 percent leased a few months after groundbreaking, and to me that’s tremendous. … So we went to meet the needs of people who get up early every morning, get on transit and go into the city to work. We wanted to give them a beautiful place to live, and I’ve very proud of what’s happened in Harrison.
NJBIZ: These are great projects, but have you had personal experiences with real estate before forming Circle Squared?
JS: Yes, and it was always so exciting to me. My brother and I started to invest in real estate through ups and downs. In 2008 we had some investments, and some did great, some didn’t do so great. We made some good calls, we made some bad calls. But when all was said and done, we came out of it and we learned a lot. We learned exactly how a deal works and how a deal is structured.
NJBIZ: But there must still be a learning curve as you develop this new venture, right?
JS: I always looked for the highest-level real estate people. I’ve always just wanted to learn from them — like Jon Hanson. I always wanted to just learn from them. There was never a point when I just went into this and said, ‘I’m going to know everything.’ I know what I don’t know, and I’ve learned a lot. We probably started investing in real estate personally back in 2003. And I’ve learned a lot, but I still don’t know what some of these legendary investors know. I learn something new from them every day.
NJBIZ: We see you write a column for Forbes and are a regular on the cable business news circuit. What do you like about having those platforms and doing all of the other commentating you do?
JS: I call it ‘Sound Off,’ where I get to write what I want to write (for Forbes). And it gives me the freedom to express what I think and what I feel about different topics. I’ve written on the economy, I’ve written on entertainment, I’ve written on music. It just gives me the freedom to do that. I’m one of these repressed creative people — I like to draw, I like to paint, I write — and I’m in this world. The one thing I have that I have full freedom in is my writing. And I have strong opinions about economies and market.
Fox Business has been a thrill for me … because as a network, I think they capture the essence of what’s going on and what investors care about when it comes to the economy, when it comes to politics. So I always like to get on and just say what I think — and sometimes what I think is not what other people think. I’m one of these people who doesn’t restrain what he has to say. (Recently) I was on with Stuart Varney, which to me is fantastic … I’ll talk about how the central bank is destroying the country, it’s destroying the economy. I’ll talk about how we’re in an earnings recession. I’ll talk about things that I feel deep in my heart are true and I just say them.
And they let me say them, so as long as they keep doing that, I’ll keep coming back.
NJBIZ: Is there anything else people should know about your business model?
JS: We’re not there to replace traditional investments. We’re not going to advisers and saying, ‘Sell all of your stocks and buy real estate.’ We’re saying, ‘Just give us an opportunity, just look at real estate. How does real estate fit in? Talk to your clients about it.’ Because everything is going to change. I’ve been saying it on Fox and I’ve been saying it in every article I’ve written: Things are going to change, investors are going to invest differently. And we want to be on the forefront of that, which is why I created this company.