S3E3: Experiential Real Estate & Disciplined Investing | Scott Paton, Managing Partner, CrossHarbor Capital Partners

Alexander Dracton (0:01)

Hi, I'm Alexander Dracton.

Phil Smith (0:03)

And I'm Phil Smith. You're listening to the student-run podcast, Blueprints & Breakthroughs by the Harvard Real Estate Review.

Alexander Dracton (0:10)

Each season, we sit down with leading practitioners at the intersection of real estate investment, development, capital markets, and technology.

Phil Smith (0:18)

This season, we're focused on next generation real estate, including alternative assets and transformative development that genuinely reshapes how we live, work, and play.

Alexander Dracton (0:29)

Let's get into it.

Phil Smith (0:31)

Okay, so today we're honored to be joined by Scott Paton. He's a managing partner and head of business development and investor relations at CrossHarbor Capital Partners, a Boston-based private real estate investment firm that invests in traditional commercial real estate and alternative real estate assets up and down the capital stack. CrossHarbor is 33 years old with $40 billion in invested capital across 400 deals and is best known for ownership of the Yellowstone Club, a private residential club, ski resort and golf resort in Madison County, Montana.

Scott brings more than 25 years of experience as an investment banker and private equity investor, having raised institutional capital across the capital markets and led private equity and financial sponsor coverage at numerous investment banks. Scott, welcome to the podcast.

Scott Paton (1:18)

Thanks very much, guys. Alex, Phil, very nice to be here and appreciate you having me on today.

Phil Smith (1:23)

All right, well, let's jump right into it. You recently joined CrossHarbor as a partner and head of business development and investor relations. What brought you to the firm and what were the biggest surprises about the platform once you got inside the firm compared to how it looks from the outside?

Scott Paton (1:37)

Oh, thanks for that, Phil. You know, there's a couple of things that brought me to the firm. First of all, I had sort of oscillated between being on the buy side of being on the sell side over my career and toward the twilight of my career was very interested in getting back to the buy side. One of the two founders of the firm, Sam Byrne, and I go back to playing little league baseball when we were eight years old and best friends through high school and college, having started a number of businesses together and actually living together, including out of sin with our both then non-wives, now wives. And so we had been partners in many ways throughout our lives.

And Sam, when he founded the firm, we actually lived together. So there were a number of occasions where we, with me coming into the firm, none of quite right for him or quite right for me. And then more recently, it was kind of the right opportunity set in terms of growing the fundraising side of the business and adding some outside perspective. In terms of what was different, I, in my career as a sponsor coverage person and private equity investor, I spent time probably across about 30 different industries. Real estate was not one of them. And as Sam said to me, don't worry, you'll get it. It's an inanimate object. If you could do multiple businesses, including technology, you'll be okay. And so far so good. Fortunately for me, we have a great deal of expertise in real estate investing. So I really don't have to dip my toe into that. There are some really world-class people here that look after those disciplines and execute that.

For me, it's more about bringing that same type of energy and expertise around fundraising and then bringing the experience that I had, particularly as an investment banker or private equity investor, across business models, best practices within several different industries and several different companies and seeing what we could apply here in an appropriate fashion.

Alexander Dracton (3:27)

That makes a lot of sense. You talked about how you've gone from the buy side, sell side, you've done both.

One thing that stood out was you spent a stretch of your career on the mezzanine and structured side when you co-founded MezzVest in London, before you started your current role in fundraising and on the investor relationship. How does your experience across the capital structure and in these different roles shape your day-to-day at CrossHarbor?

Scott Paton (3:52)

That's a really good question.

My experience on the structure side actually started well before that. I originally, the first job out of business school was with Merrill Lynch in their high-yield group. I started as a high-yield banker and have touched everything from senior loans to converts to mandatory converts to mandatorily convertible perforge, to M&A, to straight-up equity, and everything in between. So MezzVest was one of the stops along the way, so to speak.