Garfield stands out in crowd of risk-takers.

As a partner at real estate opportunity fund manager, Hudson Realty Capital, Spencer Garfield has developed a penchant for spotting real estate deals that offer the promise of spectacular returns.

Given the high level of competition and liquidity in today's real estate marketplace and the resultant spiraling cost of real estate assets, it isn't an easy task he performs. Opportunity funds have consequently been forced to aggressively pursue budding trends and to tackle deals more complex or risky than others in the marketplace would prefer to engage in.

The realm that firms like Garfield's occupy is an exciting one, where creativity and careful due diligence play a critical role and where the risks can be high but the rewards handsome.

As one of the partners of the firm charged with originating business, Garfield must himself identify untapped segments of the market where HRC can generate impressive returns yet still control its risk profile. He's proud of his own and the firm's job in this area, considering that, according to him, most private financing firms have had to take a hit in either the types of yields they will accept or the amount of risk they're exposing themselves to.

"Despite all the competition out there with everyone getting into real estate investment, we've been able to maintain adequate yields while not increasing our risk tolerance by much," Garfield said. "Not many funds can say that."

Helping Garfield make excellent real estate plays is perhaps the variety of deals he has the ability to choose from. HRC has a fund that provides mezzanine lending and another for equity financing. Two new and as yet uncompleted funds, a $100 million fund for high net worth individuals and a $350 million fund for institutional investors, will provide a combination of mezzanine loans and equity as well as bridge loans. But regardless of flexibility, how does one close deals that reap returns in the high teens amid a real estate climate where investors are routinely buying into cap rates so low, they're merely a few basis points above the ten-year treasury? The short answer would be to go where no one else is.

Exampling this, Garfield participated in the firm's recent acquisition of industrial property in Brooklyn's Sunset Park and Park Slope as well as in Long Island City. While not necessarily purchased at bargain rates, the properties have the potential to yield impressive returns based on the growing scarcity of industrial facilities in the vicinity of Manhattan.

"There used to be concentrations of industrial space in Greenpoint, Red Hook, the South Bronx and the West Side of Manhattan, but now, most of that has been redeveloped or converted for other uses and there's a shortage," Garfield said. "Not many are investing in industrial properties and keeping them as industrial properties."

Garfield has also jumped on the increasing popularity of condominium hotels, hotels wherein a portion of the rooms are sold to private owners who occupy the property for a specified amount of time and then rent their condo to the hotel when it is vacant. Acting purely as a financier, HRC granted a $25 million first mortgage to a developer of a condo hotel in development in Miami called the Savoy. Other firms had steered clear of the deal and HRC was able to command an attractive return on its loan because the property was only 97% owned by the developer.

While 97% ownership sounds like it amounts to total control, the soon-to-be hotel was previously a timeshare and anything less than 100% ownership in this case has the potential to severely curtail the developer's plans. 3% of the property is still owned by the individuals who bought timeshare privileges, a group that amounts to nearly 100 people, and according to the agreement they signed when they purchased their interest with the prior owners, they each have the right to occupy different rooms at different times of the year, a fact that would make it impossible to convert the property. The loan is consequently considered extremely risky by the market. Garfield and HRC did careful due diligence before agreeing to the loans, which will command a premium yield, because they believe the situation can be ameliorated.

"We determined that there is a sound legal process through which to fix this problem," Garfield said.

"These kinds of deals may seem risky, but we're very confident that it will turn out in our favor and this is the type of situation where we can really separate ourselves from the pack."