“We’re bullish on the US economy, we’re bullish on our projects, and we’re bullish on the American consumer, which really drives the US economy,” he says.
A long history
The Cordish dynasty spans four generations dating back to 1910 when Louis Cordish developed land in and around Baltimore. He was succeeded by his sons Paul and then David, who served in the Carter and Reagan administrations heading up an urban renewal program.
The family business known as the Cordish Companies, remains an active player more as a real-estate operator than a developer. But getting an exact figure on the size of the family’s wealth from Sinex is hard.
“We don’t really think about it because we just don’t sell anything ever,” he says.
“We’re a large established family office but not like a James Packer.” (Packer is worth an estimated $4.95 billion, according to the Financial Review’s Rich List.)
But there is no denying Cordish Companies’ ambitions to put its money to work and grow the family fortunes for future generations.
Back in America, the company is pushing ahead with a casino in West Louisiana to service the Texas market and is running entertainment complexes at some of the country’s largest sporting venues, including the Dallas Cowboys mega-stadium in Arlington, Texas.
That venue will host the FIFA World Cup semi-final in two years after organisers chose New York as the host city for the final.
The group is also rolling out high-end sports bars across the country – known as Sport & Social – with elevated standards of food and drinks and DJs playing tunes to drown out the commercials during breaks in play.
“We’re trying to create the best sports viewing experience outside of being at a live game yourself,” says Sinex of the concept bars.
But Sinex, a former Goldman Sachs banker who married into the Cordish family, has a different focus within the group. He oversees an estimated $US800 million ($1.2 billion) of their investments and its asset class of choice is private equity.
Rather unusually, it’s a program that Australian retail investors have gained exposure through via a relationship that began with the since-collapsed wealth management firm Dixon Advisory.
While Dixon Advisory’s US residential property fund blew the firm up, the $650 million of private equity investments managed under the Cordish Dixon brand delivered excellent returns via its three listed funds and one unlisted fund.
Those four funds gained between 12.9 per cent and 17.2 per cent per annum since their respective inceptions with the bulk of the capital returned to investors.
Spectacular winners
Those investors benefited from the Cordish family’s faith in private equity and in particular mid-sized PE funds that hunt for companies that are too small for the mega buy-out firms to acquire.
The plan is to keep raising money in Australia from retail investors and high net worth individuals to give the Cordish family more firepower to invest alongside its own capital.
“We’re getting into these companies at reasonable prices,” Sinex says, which has averaged seven times earnings.
“That compares to around 11 times for larger private equity investments and about 13 to 14 times for public markets.”
“When you buy right, and you have all these levers that you can pull to create great value, you really can get that outsized return.”
Sinex says the family’s objective is to compound returns from its private equity investments at 20 per cent per annum. There have been a few spectacular winners.
Just under 50 investments of those that Sinex’s division manages have returned more than five times their money, around 10 have done 10 times the return and one 50 bagger.
That was software company KnowBe4 which specialises in cybersecurity and training to test an organisation’s resilience to hacking. The investment was made by a private equity firm called Elephant, which sold the company to Vista.
The preference to invest in mid-tier companies is one advantage. Another, Sinex says, is to back ambitious new private equity managers that are raising money for the first time.
“These are not men and women with no experience but with 20 years of working at other managers and want to go out on their own.
“We lose very little sleep when we find a really talented, incentivised and properly aligned manager. That’s a good bet to take.”
Sinex says the willingness to hire and trust expert managers is to be prepared to pay management and performance fees.
“It would be foolish if you’re bypassing expertise in areas that you don’t have simply to avoid paying fees,” he adds.
“When we commit capital to a $US300 million fund, they’re not getting rich off the 2 per cent management fee. They’re building a team and that often doesn’t cover their overheads.”
“They’re doing it for the carried interest, and the carried interest doesn’t get paid unless they deliver at least an 8 per cent preferred return to us.”
In it for the long run
The Cordish Companies are a demonstration that family-run businesses are built to last.
But ironically, Sinex says the funds they invest in seek out family-run businesses that could do with an injection of capital and expertise.
“We see a lot of these businesses are run as lifestyle companies rather than growth businesses,” he says.
“There’s often an opportunity to professionalise those businesses: Cousin Eddie is running sales, when he shouldn’t be.”
Sinex says investing in smaller private equity funds means that value is being “created the old-fashioned way”.
“When people think of private equity they often think of the negatives such as offshoring, cutting costs and leverage,” he says.
“You can’t do that with a small company. It’s all about finding a business and doubling or tripling the earnings after a five-year period. You can’t put too much gearing on, and you need to be able to have the expertise and the willingness to roll up your sleeves.”
But a healthy and vibrant US economy helps, and if the likes of Warren Buffett are to be believed, it’s never wise to bet against the most powerful nation in the world, no matter who is in charge.
“Whether it’s Biden or Trump that wins, they’re not going to do anything to crush the small business community,” Sinex says.
“Everyone focuses on the Googles and the Facebooks and the SpaceXs of the world and yes, they command most of the value in the public markets.
“But what fuels the American economy is the small business. We’re bullish on the economy in general but what we’re really bullish on is the entrepreneurialism in America that is alive and well.”