Bank of America: Off to the Races
Carl Gaines Sept. 5, 2012, 10:34 a.m.
Training for a marathon while working a full-time job would be a challenge for anyone. But working up to that 26.2-mile mark while simultaneously doing your part to contribute to a nation-wide book of transactions that over the last 18 to 20 months included the origination of more than $20 billion in commercial real estate loans might pose its own set of challenges.
Steve Kenny, Bank of America’s commercial real estate banking executive for New York and New Jersey, is doing just that, though. And when he takes to the starting line for the ING New York City Marathon November 4 to set out on a course that will take him through all the five boroughs, the challenges he’ll face will in many ways be business as usual.
Mr. Kenny joined Bank of America in June 2000 from a legacy company, FleetBoston Financial, as a client manager and held this position for a decade. Fleet was acquired by Bank of America on April 1, 2004, for approximately $47 billion in stock.
“Then in May of 2010, there were some changes within the commercial real estate banking group here in New York,” Mr. Kenny remembered over breakfast recently. “And there was an opportunity for me to take over the leadership role and be the market executive for real estate here in New York and New Jersey.”
At the time, the country had just experienced three straight quarters of growth. Harvard professor Jeff Frankel declared the end of the recession on his blog, following a March uptick in employment reported by the Bureau of Labor Statistics. Still, lending in commercial real estate was on shaky ground, even in New York City.
In the reluctance of other lenders, Mr. Kenny saw opportunity.
“We were in a very deep recession in ’08 and ’09 and there was clear indication of an emergence from that and an opportunity to have the business grow again,” Mr. Kenny remembered, adding that of upmost importance in orienting himself to his new role was making sure the right employees, mindset, clients and strategy were in place. “That’s taken time for us to align all of that, but I think we had great success in 2011 because of having the right people, having the right philosophy, having the right clients. We have a lot of fantastic clients.”
Growing the business has meant endeavoring to augment the success of the bank’s construction lending platform with more bridge and term debt financing, thereby achieving a more balanced portfolio. Mr. Kenny emphasized the importance of this several times over the course of multiple conversations, in fact. This is meant to happen while forging ahead with lending on deals like Extell Development’s 90-story, mixed-use One57 project, for which Bank of America led the syndicate on the $700 million construction loan.
“It allows you to advance dollars more quickly because construction money goes out incrementally,” Mr. Kenny explained. “And obviously we’re a for-profit-driven business and enterprise and we want to put our money to work sooner rather than later.”
Augmenting the construction lending platform, however, means first and foremost getting the word out. Mr. Kenny said this is one of the top priorities—and also one of the easiest to achieve, since he’s in part dealing with a captive audience.
“Our existing clients think of us the way that we’ve projected and portrayed ourselves for a period of time, and we need to make sure that they understand what it is that we’re pursuing these days,” he said. “Number two, we need to find new clients. This is the largest real estate market in the United States, and we have a significant number of high quality clients today, but there are other names out there or other clients—what I’ll call prospects for us—that we can, should and will be doing business with in the future.”
Of all of the bank’s loans in the New York area, Extell Development’s One57 project has gotten by far the most attention, initially because on paper it didn’t necessarily look so alluring. “The headline was ‘Condo, Hotel, Construction’ and that was not an easy headline to be selling into,” Mr. Kenny remembered. “As we sit here today, the world’s a little bit different. We did that transaction. There have been a handful of other condominium transactions that have completed, so the bank market has warmed to condo construction, though it’s still somewhat restrictive.”
Mr. Kenny said that One57 has been particularly successful as a marquee transaction. For one thing, it demonstrated Bank of America’s willingness at the time to think outside of the box. He credits Brad Dubeck and Dale Blumenthal—client manager and underwriter, respectively—with structuring the deal. “When the deal originally came in, it didn’t look like and it wasn’t being talked about in the same light as, what we ultimately ended up structuring and being able to sell into the marketplace,” he said. And then he gave credit as well to David Friedman on the syndications team for explaining the intricacies to the banks that would ultimately end up participating in the syndicate.
Despite challenging headlines, though, Mr. Kenny said, One57 was ultimately handled the way that any transaction would have been. Asked why it made sense, he didn’t hesitate. “First and foremost—and this is philosophically the way that we always try to manage our business: sponsorship,” he said. “We had existing relationships with both the development and equity partner here in New York and the equity partner overseas. Number two, the amount of cash, equity, in the transaction was extremely significant and, again, that’s something we look for as a pillar of how we want to do business. The third is the business plan. Did the business plan make sense? And so Hyatt’s involvement with a new brand that they were bringing to New York, their capital was committed to it and there was a contractual obligation for them to purchase the hotel upon completion.”
An additional bonus to the One57 deal has been the influx of other business, though Mr. Kenny wouldn’t be specific about exactly what deals have come to the bank as a direct result of the project. Among these might be the funding of a construction loan for a freestanding hotel that Extell is reported to be putting up on 45th Street.
“That transaction led to a very significant increase in our relationship with the partners involved,” he said, “and identifiable, profitable transactions that we were able to complete for those clients. Then I think it also positioned us in the marketplace as, ‘Wow, Bank of America is willing to be creative, to be thoughtful and to try to help clients achieve their goals.’”
Other recent deals include $90 million in construction financing provided to TF Cornerstone for a multifamily project at 45-60 Center Boulevard in Long Island City, Queens, and a bevy of term loans that show positive results for Bank of America’s efforts at better balancing its portfolio—though many are for properties and projects located outside the New York tristate area. For example, there was a $79 million, 5-year term loan on residential properties at 9045, 9090, 9110 and 9120 Judicial Drive in San Diego, a $70 million term loan to Building & Land Technology for its residential property at 101 Park Place in Stamford, Conn., and a $125 million term loan for a Monday Properties office portfolio in the D.C. metro area.
The bank also recently provided an acquisition loan for a Gramercy Park office and retail project for Angelo, Gordon & Co., Mr. Kenny said. Angelo Gordon is also working with Bank of America to potentially refinance the construction of its condominium conversion at Carlton House at 680 Madison Avenue, along with Extell Development.
Adam Schwartz, managing director and head of real estate at Angelo Gordon, said that the amount of the refinancing hasn’t yet been determined but that talks with Bank of America are underway.
“I enjoy dealing with him,” Mr. Schwartz said. “He’s a real straight-shooter and does what he says he’s going to do for you. He doesn’t play games and is just a good guy.”
Another client, Jeff Blau, president of the Related Companies, applauded what Mr. Kenny did as the market first started to improve.
“Bank of America has really been on the forefront of real estate lending to the best customers since the aftermath of the downturn,” Mr. Blau said, “which I think was a very smart strategy to pick up market share.” He added that the bank has looked at top-tier only for construction financing and has been shrewd in picking and choosing who to do business with.
“They are right now involved in virtually every single construction financing that we’re doing,” Mr. Blau pointed out. He added that Bank of America has been aggressive in booking new business with Related since other banks have pulled out of the marketplace.
It’s a volume of business that requires a great deal of focus, not to mention the patience required to effect some change in the make-up of the bank’s lending platform.
The fact that he is shrewd, with an eye on the bottom line is perhaps a function of Mr. Kenny’s background. He grew up in working-class housing in Stuyvesant Town and said that he often runs loops there as part of his marathon training. Later, his parents’ dream of home ownership prompted a move to Long Island. After his grandfather retired, his grandparents made the move from Stuyvesant Town to Long Island as well.
He has an accounting degree from the State University of New York at Plattsburgh, but said that he never “applied the craft directly in an accounting firm.” Currently, he splits his time between the family home in Vestal, N.Y. and a Tudor City apartment.
Asked about role models in the business—anyone who mentored him as he was coming up in banking or had a particularly positive influence—he instead credits his parents.
“They had incredible work ethic and instilled that in me and I think that is the number one thing that separates successful people from less successful people,” he said. “What we do is relatively straightforward. We make judgments on people and their financial profiles.”
His parents also instilled in him the importance of being prepared—something likely to come in handy November 4. “If you’re not prepared, you’re not going to be successful—whether it’s running a marathon or running a business,” Mr. Kenny cautioned. “They always say, ‘Enjoy the journey.’ The journey is in large part about the preparation to get to the point where you can be successful, so I take a lot of pride in working hard and trying to be enthusiastic about what I do. I have my days just like anyone else where it seems harder than it should be. But that’s O.K., because the next day I’m back and I’m energized and I’m eager to go.”
- Carlton House
- Monday Properties
- Stuyvesant Town
- TF Cornerstone
- ING New York City Marathon
- 680 Madison Avenue
- FleetBoston Financial
- Building & Land Technology
- Bank of America
- Related Companies
- Angelo Gordon & Co.
- Bureau of Labor Statistics
- Dale Blumenthal
- Jeff Blau
- Brad Dubeck
- Jeff Frankel
- State University of New York at Plattsburgh
- Adam Schwartz
- Steve Kenny
- Extell Development Company