#119 Michael Kovacs, Founding Partner at Castleforge
Apr 3, 2025
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Michael Kovacs, Founding Partner at Castleforge, shares insights from his journey as a real estate investor. The conversation kicks off with a quirky story about how getting stuck in a lift spurred his entrepreneurial spirit. He discusses the evolution of the office market post-COVID, highlighting the shift in tenant preferences and the importance of quality locations. Kovacs also addresses the fundraising challenges for Castleforge's fourth fund and explores opportunities in Asia and the Middle East, revealing key shifts in investor sentiment.
Michael Kovacs' transition from a successful career at Blackstone to co-founding Castleforge exemplifies the transformative power of mentorship and serendipitous opportunities in real estate.
The journey at Westbrook Partners equipped Kovacs with diverse experiences in real estate investment, emphasizing the importance of adaptability and hands-on learning during unpredictable market conditions.
Kovacs highlights the current office market's dichotomy, where high-quality properties in prime locations still attract demand despite broader industry concerns related to post-pandemic shifts.
Deep dives
The Impact of Leaving Blackstone
Leaving Blackstone in 2005 is viewed as one of the speaker's worst financial decisions. The experience at Blackstone offered invaluable insights and skills that shaped their career path. Initially joining as part of the mergers and acquisitions team, the speaker was drawn to real estate during their studies due to engaging professors and hands-on industry connections. This pivotal transition underscores the importance of mentorship and professional development in forming a successful career trajectory.
The Genesis of Castle Forge
The unexpected journey towards co-founding Castle Forge began while the speaker was stuck in a lift with co-founder Brandon Hollihan. This situation led to an open conversation about potential entrepreneurial pursuits, which resonated with their shared aspirations. The experience highlighted how serendipitous moments can ignite the spark for new ventures. Ultimately, the idea was seeded during a challenging, yet personal interaction that fostered a commitment to explore new opportunities in real estate.
Experiences at Westbrook Partners
At Westbrook Partners, the speaker gained a multifaceted experience in real estate, working in a small team that required individuals to take ownership of various roles. This unique structure allowed for a comprehensive understanding of real estate investment, development, and management. The hands-on approach included analyzing transactions, overseeing asset management, and engaging in international projects, which significantly accelerated their career growth. The opportunity to collaborate closely with experienced industry leaders further amplified the learning experience.
Lessons on Adaptability Post-GFC
Transitioning from Westbrook to starting their firm, the speaker emphasized the importance of adaptability during uncertain market conditions after the global financial crisis. Their strategy involved taking on advisory mandates to ensure a steady cash flow while building their track record in real estate investment. This adaptive approach allowed them to grow their business organically while also preparing for future fundraising efforts. By establishing strong relationships and proving their capabilities, they successfully navigated through challenging times.
Navigating the Current Real Estate Landscape
The current sentiment in the real estate market is heavily influenced by perceptions surrounding office space post-pandemic. Despite fears of obsolescence, the speaker argues that a nuanced understanding of location and property quality is essential for investment success. They highlight that good-quality offices in prime locations are still highly sought after, contrasting with weaker segments struggling to attract tenants. This perspective underscores the need for investors to differentiate between cyclical and structural challenges in asset classes.
Exploring Data Center Opportunities
The speaker's venture into the data center space stems from recognizing its potential as a growth sector driven by technology demands. They strategically partnered with a U.S. operator to leverage their expertise while navigating the complexities of European markets. Understanding the dynamics of power availability and site selection is crucial for success in this field. The speaker expresses interest in capitalizing on special situations within data centers, showcasing their commitment to adaptive investment strategies in evolving markets.
OUT NOW – Michael Kovacs, Founding Partner at Castleforge, a research-based, thematic, vertically integrated real estate investor, investing in the UK and Europe on behalf of pension funds, institutions and individuals, sits down with me on the People Property Place Podcast 🎙️ this week.
Prior to founding Castleforge in 2010, Michael worked at Westbrook Partners in London, where he was involved in transactions representing over £2bn of asset value for Westbrook's various funds in the UK, Europe and Asia across a diverse range of real estate investment types. Prior to Westbrook Partners, Michael worked at the Blackstone Group in New York. Michael graduated summa cum laude with a Bachelor of Science in Economics from the Wharton School at the University of Pennsylvania. I sat down with Michael, to discuss a broad range of subjects which covered some of the following topics:
• How he got into real estate and his early career steps • How getting stuck in a lift triggered the start of setting up a business • Evolving the business from advisory mandates to, co investing on deals, and then raising discretionary funds • Evolution of the office market and where the opportunity sits • Why vertical integration mattered in building Castleforge • The disconnect between occupier demand and investor sentiment relating to offices • Asia and the Middle East, capital raising pivot • Fundraising challenges - why raising Fund 4 has been tougher than the debut fund • Datacentre exploration, and debut deal
Oh and one last question - who are the People, what Property, and in which Place Michael would invest should he have £500m of capital at his disposal.
Catch the full episode which is live on Youtube, Spotify and Apple NOW!
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