Miami Beach investor sets sights on Mongolia
10/22/2013 4:23 PM
10/22/2013 5:13 PM
With the wind chill, temperatures in Ulan Bator, Mongolia, dipped below 10 degrees last week. Still, Harris Kupperman showed up for his job in a short-sleeve polo and Ray-Bans, an iced coffee in hand.
As CEO of Mongolia Growth Group, Kupperman, 32, splits his time between Mongolia’s capital city and Miami Beach, where he was last week, working from a Starbucks in the South Beach Marriott.
“I think we’re keeping Skype in business,” he joked about his company’s heavy use of the videoconferencing site.
When Kupperman, a millionaire who also runs Miami Beach-based hedge fund Praetorian Capital Management, makes the 24-hour, three-plane jaunt from Miami to Ulan Bator, he flies coach.
“I don’t take a salary as CEO (of Mongolia Growth Group),” he said over dinner at the Local House in South Beach. “I own 15 percent of the company, so every dollar we spend is like $.15 out of my pocket. Then again, if our investments do well, I do very well.”
So far, his investments have been doing quite well.
When Kupperman co-founded Mongolia Growth in 2011, he took it public with about $4 million in capital, mostly from himself, friends and family. The company raised $51 million that year, and it’s invested about $40 million in Mongolian real estate. Those investments, Kupperman said, have "appreciated quite substantially." The company ( MNGGF in U.S. OTC Market, YAK in Canada) now has more than 3,000 shareholders and more than 100 Mongolia-based employees.
Kupperman, a native of Long Island, N.Y., moved to Miami Beach in 2004 after graduating from Tulane University in New Orleans. He started Praetorian from his college dorm room and continued to manage the fund from South Florida as he sought other investment opportunities.
(The investment bug bit Kupperman early: As a high school senior, he finished second out of 9,500 competitors in a fantasy stock market game, turning $500,000 in play money into $18 million in six weeks. The winner was a professional trader.)
A three-day trip in 2010 to “kick the tires” of Mongolia’s fledgling economy turned into an intense three-week stay for Kupperman and laid the foundation for Mongolia Growth.
“I was just amazed at how much potential I saw,” he said. “As an investor, you go to where the growth is. The economy of Mongolia is set to grow 12 percent this year. There is nothing else in the world that is as close to as exciting as what’s happening in Mongolia right now.”
Kupperman and his company are banking on reaping the rewards of a massive new copper mine coming online in Mongolia’s Gobi Desert.
The mine will employ thousands and is expected to produce $7 billion worth of copper a year, giving a major boost to Mongolia’s gross domestic product, which was $10 billion last year. Several other mining projects that tap into natural resource-rich Mongolia also are contributing to what Kupperman says is the world’s fastest-growing economy.
“In the next 10, 20 years, nothing will grow like Mongolia has been growing,” he said.
Mongolia Growth is heavily invested in Ulan Bator real estate and, to a lesser extent, the insurance business. Most of the 75 commercial, retail and residential properties it owns or manages are on Peace Avenue, the main drag that runs through the crowded downtown.
Kupperman, who compared current-day Ulan Bator to “Manhattan in the 1850s,” sees Peace Avenue as becoming the next Fifth Avenue or Lincoln Road, and he envisions the capital city developing like wealthy Doha, Qatar, or Abu Dhabi in the United Arab Emirates.
“We know it’s going to be a huge city, so it’s all about getting in early and getting the right locations,” he said. “The noodle shop we own today will be an Armani store in five years.”
Mongolians, from nomads to businessmen to government officials, have been friendly and welcoming, Kupperman said. They even managed to turn the longtime vegetarian back to meat, in large part with mutton-filled fried pastries called khuushuur.
When in Ulan Bator, Kupperman stays in a 12-story Soviet-era apartment building that frequently has no electricity – a far cry from his luxurious digs in the Murano at Portofino condominium in South Pointe Park.
Of Mongolia Growth’s dozens of Mongolian employees, about a quarter of them live in traditional nomadic tents on the outskirts of Ulan Bator while others have risen toward the middle class.
“Some guys who work for us were literally chasing goats three years ago, and they’re making $2,000 a month now,” he said. “I believe in Mongolia, in the Mongolian people, and I love being on the ground for this stage of its development. We’re going to be there for at least the next 20 years. We’re there to stay.”
Kupperman’s confidence has managed to persuade peers and potential investors who are reluctant at first pitch.
“Most people don’t wake up and say, ‘I’m going to invest in Mongolia today.’ Most people don’t even know it exists. So it takes a fair amount of educating and convincing.”
Mongolia was nowhere on Matthew Goodman’s radar when he moved to South Florida from New York in 2011 to work for Praetorian Capital. Before he could unpack his bags, Goodman found himself on a flight with Kupperman, his new boss, headed to Ulan Bator.
Goodman’s first impressions upon landing: It’s freezing. No one speaks English. The food is lousy. There are no taxis. What are we doing here?
“Some of the things (Kupperman) does, he thinks they are normal, but they’re not,” Goodman said. “But then you sort of realize the brilliance behind the madness: He’s found this pot of gold in a place where no one wants to go get it.”
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