|The Bahamas Investor Magazine
January 1, 2017
January 1, 2017
Sterling Global Financial is rapidly becoming a flag bearer of success for the Bahamian financial services industry. The group, which has more than $9 billion in assets under management, combines real estate investment, fund management and boutique banking to offer a full range of financial services. According to founder and CEO David Kosoy, his business can credit its success to quality service, a depth of intellectual capital and a well-earned reputation.
Kosoy began his real estate career in Canada. The young entrepreneur had graduated from Osgoode Hall Law School in Toronto but decided to focus his efforts in real estate simply because it was “fun.” Kosoy established his first real estate investment company Brother Developments in 1970 and caught the bug. “I enjoy it because it’s creative. I enjoy making deals,” he says.
After making his mark in the Canadian industry, Kosoy sought new challenges in the US, where he established the Sterling Companies in 1986. The investment group grew rapidly and in 1999 acquired the publicly-traded Samoth Capital Corp. Kosoy renamed the company Sterling Centrecorp and transformed it into a booming business, acquiring retail space all over America including the Mall of the Americas in Miami and Westland Mall in Hialeah, Florida.
When he left Florida in 2004 to move to The Bahamas, Kosoy’s son took over the helm and today Sterling Centrecorp owns around 8 million sq ft around the US.
In 2004, having sold his interest in the company, Kosoy was at a loose end. “I didn’t want to retire so I asked myself: what could I do?” he says. “I understand real estate and I understand lending, so I decided to start lending.” Seeing a gap in the market in The Bahamas, Kosoy moved from Florida to Nassau and formed Sterling Global Financial. “I thought there was a lack of financial liquidity on a timely basis backed by mortgages in The Bahamas. We filled a void where the banks weren’t, because first and foremost we understood real estate. Banks are not real estate first, they are lenders first. We are real estate first and lenders second. The real estate market in The Bahamas was not big enough to start something, so we decided we would concentrate on lending.”
From little acorns
In these early days, Sterling consisted of only two employees–Kosoy and an assistant–so he leveraged his extensive business network to give the fledging company some momentum. Kosoy’s associates were quick to get involved, knowing of his long-standing reputation for striking profitable deals. “When I started to lend, I just picked up the phone and raised $25 million from friends within 30 days. We have partners and investors from the early 1970s that are still with us. There is hardly a day goes by that we don’t get a deal either through repeat business or through referrals or people we’ve done business with, and are still doing business with. We have investors from all around the world, whether it’s Hong Kong, Africa, the UK, Ireland, Croatia. Our history has always been quality. I put the client first; our investors are first.”
Sterling has funded more than $300-million worth of development throughout The Bahamas in the last decade, including the Sky Beach Club in Eleuthera, Matt Lowe’s Cay in Abaco and Ocean Club villas on Paradise Island. More recently it helped finance the construction of the Marriott Courtyard hotel in downtown Nassau, the Thirty Six luxury condominium project on Paradise Island and the Ocean Terrace development in Western New Providence. The latter has seen a succession of owners in recent years and development on the site had stalled. Kosoy says he is glad to be finally bringing it to market and says finishing it was a point of pride for Sterling, which relies heavily on its reputation. “We started from scratch and decided we were not selling anything until we had totally finished,” he says. “People were let down by the previous owners so we wanted to make sure people had faith in us that we were able to finish anything we started. We had the financing to complete it. We believe in our reputation and if people have issues, we fix them. The first thing is that our client has to be happy. If the client is happy, we are happy.”
Many of Sterling’s real estate projects are funded through the group’s flagship fund, the Sterling Mortgage Income Fund (SMIF), formerly the New Providence Income Fund Ltd, which has been going from strength to strength since it was launched in 2012. An open-ended offshore fund, the SMIF is a mortgage fund invested in jurisdictions around the world and focusing primarily on real estate. It was named best fixed- income mortgage-backed fund since inception by Acquisitions International in early 2016 and has been ranked number one on the Sharpe Index, which measures safety and security for the past three years. In 2015, the SMIF delivered a 13.8 per cent return to investors.
“The fund has shown double digit returns,” says Kosoy who credits the team behind the scenes for the SMIF’s success. “If you look at our returns, we’re the best in our category. I think the reason is that we have an amazing team. The intellectual capital and the connections all of us have here and onshore are amazing.”
Sterling’s current board of directors include a past premier of Ontario, a former president of private banking with Citibank and a former president of bond trading at Merrill Lynch. Kosoy points out that these members are also investors.
The SMIF’s strong performance, and its growing popularity is not only good news for Sterling, it also benefits The Bahamas, according to Kosoy, who notes that the group has often been able to help developers get projects off the ground that would otherwise have failed. In this way, he believes that Sterling makes a substantial contribution to the country’s economy. “Financing mortgages, vertical real estate, creates jobs. We believe we have created directly or indirectly, over the years, thousands of jobs in The Bahamas. People come to us who can’t do something with the banks and we will give them a commitment right away. We may be more expensive, but we get the deal done and if you can’t afford our expense, then you shouldn’t be doing a deal because our returns should be less than yours.”
Expansion and growth
Two years after establishing the SMIF, Sterling added another major fund to its portfolio. The New Providence Opportunity Fund is a closed-end equity investment fund through which high-net- worth and institutional investors target diverse real estate opportunities in the US, Canada and the Caribbean. Kosoy says branching out internationally is key to Sterling’s growth. “We are doing deals outside the jurisdiction. That is how we can grow. We are doing deals in Antigua, Turks & Caicos, Cayman, the US, Canada and the UK.”
Sterling, which also operates a trust company in the Cayman Islands, expanded further in May 2016 with the launch of Sterling Bank & Trust, a full- service banking component which Kosoy says naturally grew out of the funds business. “We have morphed into a bank which helps our funds a lot. It’s good for the bank. It’s good for the funds.”
At press time, the new banking arm had around 30 clients, with Kosoy deliberately taking an unhurried approach to building the business. “We want to make it an exclusive club where our companies are all real estate related. We are taking them on slowly. It is just people who meld with us. We are not taking on small depositors, but someone who will use all or most of our services including wealth management.”
Bucking the current trend of contraction within the industry, Sterling Bank & Trust has established two correspondent relationships with major banks. As Sterling moves to become a one-stop-shop for its exclusive clients, the group also launched its new website in spring last year. The site features a client portal that can be accessed securely from any device. Through this electronic gateway, investors are able to manage banking, view their documents and access a variety of services.
Making a contribution
While Sterling sets a course for growth, Kosoy, now in his seventies, says he has no plans to slow down. “I tried to retire once when I was 45. It lasted six months. Retirement is one thing I’ve failed at. I get up every morning and I’m energized. As long as you enjoy what you’re doing and as long as you can make a contribution, you should keep doing it.”
Making a contribution is a key part of Sterling’s ethos. The company, which now has around 40 employees, knows that its staff is key to its success and Kosoy says he gets his greatest satisfaction from watching them develop. “I want to be a net contributor to society, and to all of our employees. Our people really go above and beyond; we like to help them do that. If anyone wants to continue education, they can. Seeing people blossom and learn gives me great satisfaction. If I can impart some wisdom to someone that can improve their life, then I’m happy. I really don’t do this for money.”
Kosoy’s philanthropic efforts extend outside the office too and Sterling is a substantial contributor to various children’s charities in The Bahamas. Recently Kosoy sponsored a 12-year-old girl–giving her part-time work in the office and agreeing to finance her education until she could realize her dream of becoming a paediatric cardiologist. His next goal is to hire someone who has been through the prison system. He hopes the project will set an example for the private sector. “I want to hire someone who has a criminal record or has been incarcerated. We want to hire them and challenge other corporations to hire someone with a record. It takes people out of jail and gives them another chance and possibly an education. I’m proud of every deal we’ve done, but when you can make a difference in someone’s life, that’s of what I’m most proud.”