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Saturday, May 28, 2022

Alternative Financier

From his office 12 floors up, Alexander L. Cappello has an expansive view of the Pacific Ocean. Yet Cappello’s vision for business runs past the beach to the Valley – and beyond. The Santa Monica investment banker’s skills are working hard for two of the San Fernando Valley’s largest publicly traded companies – Cheesecake Factory Inc. and Sport Chalet Inc., as well as clients around Southern California and in 50 countries. He believes his Cappello Capital Corp.’s reach is definitely global. “In today’s world, you can’t think locally in your backyard, you have to think globally,” he said. After 40 years of business, Cappello has advised clients on mergers, acquisitions, strategic partnerships, private placements, financial restructurings and corporate valuations. His largest deals include a $2.2 billion restructuring of Trump Entertainment Resorts, the $3.9 billion purchase out of bankruptcy of Extended Stay Inc. and participation in a $19 billion mortgage portfolio sale by CitiGroup Inc. Cappello’s office gives a visual of his career: tombstones display the deals he’s worked on, Trojan memorabilia show his love for USC, and assorted recognitions, plaques and awards. But even in the midst of these success symbols, Cappello admits it has sometimes eluded him. “I’ve made plenty of business mistakes,” he said. “I learned more than once in my life, it’s real easy to take on too much debt when it’s available. … I learned to be very prudent – take less upside but less risk, because debt is a sword that cuts both ways.” Perhaps he’s able to put it all in perspective given the larger battle he faces. Cappello walks with a cane because he has a degenerative spine disease, which he concedes will eventually confine him to a wheelchair. But he deals with it with equanimity and said he feels no need to hide his disease. Cappello, 58, started his business career in Bakersfield. As a boy growing up on his father’s farm, Cappello helped in the fields before heading off to earn a business degree at USC. After his freshman year, he got an internship at the U.S. Small Business Administration’s office in Los Angeles. After pulling out a file for the Glendale Produce Co., Cappello decided to meet with the owner. Putting his youth aside, Cappello applied the business skills learned on the family farm to the accounting systems at Glendale Produce. He recommended a higher loan with a lower interest rate. The new loan eventually helped Glendale Produce increase its production and cash flow. Seeing how his actions were valuable to the company inspired Cappello to pursue investment banking as a career. During his studies at USC, he had already started Cappello Group, accumulating enough clients to finance his college education by the time he graduated. After graduation, he headed to International Business Machines Corp. for a management training program. Bored, he left after seven months to work for Union Bank, N.A. in Los Angeles as a business development officer. But he still had his investment business on the side. When Cappello went full-time with his business, client referrals started coming in. His list of past clients includes Koo Koo Roo Enterprises Inc., Macau Gaming and FAO Inc. Global vision When Interneuron Pharmaceuticals, a developmental drug company in Lexington, Mass. needed help raising money, Thomas Farb, the chief financial officer at the time, gave Cappello a call after reading about some of his recent transactions. “Alex took on a very difficult assignment raising money for a public company right before potential stock volatility from an FDA review of our drug,” Farb said. “He knew how to solve problems a company faces, structure a financing and find the right long-term investors. He placed our deal with some of the most reputable and long-term investors.” Eventually, strategic advising assignments led to offers to serve on corporate boards. Currently Cappello is a director at Cheesecake Factory. Two years ago, Cheesecake started an international expansion through a franchising agreement with M.H. Alshaya Co. WLL of Kuwait, which has opened locations this year in Jeddah and Dubai. Chief Executive David Overton said Cappello’s experience came just in time for the company’s move abroad. “Mr. Cappello added an international dimension to our board just as we began to seriously consider growing overseas. His experience gave us additional confidence that we were on the right track and his international finance background provides us with insights as we explore our options,” he said. In September, Sport Chalet, the La Cañada Flintridge upscale sports retailer, announced it had retained Cappello to aid in a search for strategic partners. The chain has struggled for years with slumping same-store sales and declining stock prices. Craig Levra, chief executive, said Cappello’s familiarity with business strategies attracted the company to hire him. “He is creative in getting financing deals structured, bringing the depth and sophistication that matches any of Wall Street’s biggest banks,” Levra said. “We are excited to partner with him to help us accelerate our growth and unlock the untapped value of our company and brand.” The company has yet to announce a deal, but Cappello said he has held discussions with international manufacturers, other retailers and technology companies looking to expand in the Southern California region. Looking back, Cappello thinks knowing what to do in business comes from age and experience. And that includes making mistakes. At one point, he turned down an offer to invest in Starbucks Corp. when Howard Schultz, chief executive of the Seattle coffee company, approached Cappello to be an early investor in the coffeehouse, which at that time had less than 10 stores. He chuckled as he said that Starbucks was definitely his biggest regret, but insists he would still be working even if he had struck the deal. “While making money is always important, I guess loving what you do for a living is more important,” he said. “Let’s say life would be more comfortable if I had made those deals, but it doesn’t really matter.”

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