Goldman invests in security

Seven-year-old lending group likes the space
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Thursday, February 17, 2011

ATLANTA—Goldman Sachs doesn’t have a security investment group, but three members of its seven-year-old Specialty Lending Group—managing director David Miller, director Greg Watts and VP Chris Semple—specialize in the security space.

“It’s not a special division, but David Miller, Greg Watts and I see most of the alarm transactions and are familiar with a majority of the larger companies in the space,” Semple said.

“We look at deals from the debt and equity perspective and have invested more than $300 million in the space to date,” he added.

Goldman’s most recent investment in security was announced this week when it joined a group of lenders in a deal where ASG Security upped its line of credit to $230 million.

Semple said he and Miller “started watching ASG when [Goldman] first got into the space. “We like Joe Nuccio and Ralph Masino. They have a really good track record and now it made sense for us to come in [on this deal]. We’re big fans of those guys; they’ve got a really nice business model.”

Semple said Goldman likes the commercial and residential side of the business.

“We like the visibility as well as the lack of volatility the long-term contracts provide from a cash-flow perspective. Specifically, on the commercial front, the creation costs and attrition are typically lower and thus the NPV [net present value] of the projected future cash flows are higher,” Semple said. “Your dollars-at-risk up front on the commercial side are less than in residential.” On the other hand, where creation costs are higher with residential accounts, the upside is that “accounts are generally more liquid.”

The Specialty Lending Group at Goldman is actively pursuing more investments in the space. “Our typical low end is around $15 million in terms of money to put to work and as high as $150 million on the hold side,” Semple said.