Survivor: Real Estate
Bogdasarian's firm is organized similarly to a real estate investment trust, or REIT, where investors buy into a company's portfolio of properties. While many REITs' share values plummeted by 50 percent or more in the late 2000s, Bogdasarian managed to grow his business.
He attributes that success to a measure of foresight but also to a conservative philosophy that favors low-risk investments. "There's a lot of ways to mitigate risk," Bogdasarian says. "But in a lot of the deals we see, we don't see people doing that." When it comes to borrowing money, he prefers shorter-term loans (nothing over twenty years) and a debt service coverage ratio (which compares available income to annual debt payments) of 2 to 1, rather than the normal 1.2 to 1. He dislikes speculation and prefers properties that will generate cash flow from the get-go, keeping an eye out for properties that sell below the cost it would take to replace them.
Sensing in 2007 that trouble was coming, Bogdasarian sold off one of his major assets, a 129-unit student housing portfolio in South Bend, for $14 million. As the recession hit, Bogdasarian cooled his heels, keeping an eye on what he calls a "silent" real estate market and awaiting the right moment to get busy again. "There were certain people who would say, 'Don't forget to turn out the lights when you're the last one that leaves Michigan,'" he says. "And I was like, 'Michigan isn't going anywhere.'"