Mortgage Observer talked to Gary Otten, managing director and head of real estate debt strategies for MetLife Real Estate Investors, about outsmarting recessions, his team’s recent gains, and the appeal of fortress malls as lending assignments.
Mortgage Observer: How did you get your start in the business and when did you join MetLife?
Mr. Otten: My real estate lending career began when I joined a four-person origination and syndication team at the Toyo Trust and Banking Co. Our team focused mainly on construction and short-term loans on office, retail, and multifamily assets across the United States. It was the early 1990s, and I was fortunate to be working for one of the few active lenders in the market during that particular recession. I decided to leave Toyo in August 1996 to relocate to Atlanta. Shortly after settling in Atlanta, I accepted a position with MetLife’s Real Estate Investments team, as it was an excellent fit culturally and professionally.
You came into your current role in 2013. What have you accomplished since then for MetLife’s commercial real estate debt investments?
We have continued focusing on building strong industry relationships. Our entire MetLife real estate team works diligently to remain one of the largest U.S. life company portfolio lenders by volume and balance sheet. Since assuming my current role, highlights have included $11.5 billion of commercial loan originations for our portfolio in 2013 and our successful launching of a third-party debt asset management platform that continues to grow in number of clients, products and assets under management.
At last year’s MBA conference in Orlando you told a panel that your favorite property types other than multifamily were industrial properties and fortress malls. Why is that?
During the Great Recession and in prior economic cycles, we witnessed fortress malls and institutional-grade industrial properties performing relatively well and providing a solid portfolio foundation. In addition, as the current economic recovery continues to strengthen, the cash flows from these two property types are expected to share in this growth of the overall economy, thereby making them sound mortgage investments if a lender is able to win these highly contested lending assignments.
Can you discuss one or two industrial or mall deals you and your team recently worked on?
With the strong return of life companies, banks, conduits, and single-asset securitization lenders, the top tier mall and industrial pools financings have been some of the most sought after lending opportunities. Fortunately, our Dallas regional office was able to win the mandate for 10-year fixed rate financing secured by the 1.4-million-square-foot Galleria Dallas Mall located in the heart of North Dallas. On the industrial front, our Mexico City regional office has continued a successful run of financing top-tier industrial properties throughout Mexico. Earlier this year our Mexico City team won a $93 million floating rate portfolio loan assignment secured by 10 industrial properties totaling 2.4 million square feet spread amongst top industrial markets in Mexico.
What are your expectations for the commercial real estate debt market as a whole in 2015?
At this point it’s difficult to see anything more than a continuation of the abundance of real estate debt capital we have seen blossom over the last 18 months. The banking regulatory landscape could potentially have a slight negative impact on the proceeds available for construction lending, but beyond that it is a relatively healthy market with lending supply generally exceeding demand. Everyone in the real estate debt markets has a watchful eye on loosening credit and underwriting trends. Thus far there has been a reasonable amount of discipline on the lending and the borrower front, so I am hopeful that the market’s discipline continues.