Madison Realty Capital has done $1 billion in transactions since it began investing in 2005. The Mortgage Observer spoke to co-founder Josh Zegen about the types of deals Madison, which just closed a new fund, is putting together of late.
The Mortgage Observer: Can you tell me your title here and how long you’ve been at Madison Realty Capital?
Josh Zegen: I co-founded Madison in 2004 with Brian Shatz. My official title is managing member and co-founder. And Madison Realty Capital started out with a first fund in 2004 that focused on the debt business. That was a $310 million fund and that fund was set up to do bridge lending—to lend to commercial owners of multifamily office retail and industrial properties for time-sensitive transactions. The goal was to focus on the middle market, which we thought was underserved.
And how did you get your start in the business?
I graduated from Brandeis University and then started a mortgage brokerage company in 2001. When we were brokering a lot of these private, short-term bridge loans, I discovered the niche of the bridge lending market. There was a need for a fund focused on first mortgage bridge lending in the sub-$30 million market. When I saw that need, I got together with Brian Shatz and then went to a family office and met a number of investors that really were the first money for us to start in 2004. The goal was always to create a vertically integrated platform, where we would have lending and other things and really ultimately be owners of real estate.
We started to build the organization and service our own loans and really did everything in-house as a normal lender. At the time, generally, lenders didn’t own much in real estate because they would get either paid off by another lender or the properties were liquid and they would sell. But when 2008 came, that started to change as the markets changed and there was less liquidity out there and lenders weren’t lending, so we started to take ownership of real estate. One of the things we discovered was that when you rely on third-party managers to manage real estate, there is a misalignment of interest and you don’t necessarily have the ability to take ownership and reposition the real estate, and that’s a lot of times where the best benefit is. So in 2009, we brought on Martin Nussbaum to really focus on building our own property management and asset management company—Silverstone Property Group.