Guelda Voien April 8, 2015, 12:38 p.m.
It’s a cliché, at this point, to note a banker’s humble beginnings. But for George Klett, the executive vice president and chairman of the commercial real estate committee of Signature Bank, those beginnings are so humble as to mandate mention.
Mr. Klett, born and raised in a German-Irish family in the Bronx, and the son of a sanitation worker, began working when he was 11. Since then, he has rarely stopped.
“We didn’t have any money but I had a great childhood,” said Mr. Klett, with whom Commercial Observer met in his Melville, Long Island office recently. Indeed, he laments that his own children cannot have similar beginnings.
After learning the ways of the world from the grocer who gave him his first job, Mr. Klett went on to run that grocery store while putting himself through college (though he didn’t graduate). He later joined the Air Force during the Vietnam War, and after four years as an aircraft mechanic found himself driving a cab in the Bronx at night, unable to find work in the early 1970s, with a wife and two young children at home.
At that point the city was broke and not hiring, so despite the fact that he had passed the tests to become a sanitation worker like his father, he was not hired. This has made for a good joke about how he got his start, recalls Paul Greenbaum, a managing member at brokerage GCP Capital who frequently works with Mr. Klett.
He’ll say, “I couldn’t even get a job as a fucking garbage man,” Mr. Greenbaum recalls, laughing.
Of course, that’s all behind Mr. Klett. Nowadays, he is doing pretty well. He helms commercial lending at Signature Bank—the second most active real estate lender in the five boroughs last year, according to numbers from mortgage data firm Actovia. Last year, Mr. Klett closed $1 billion in deals with GCP alone, by Mr. Greenbaum’s estimates.
“He has been known to walk into an Aston Martin dealership on a Wednesday and walk out on a Thursday with a new car,” Mr. Greenbaum said.
Of his chance hiring at Signature—a bank that didn’t even have a significant multifamily presence before he came on back in 2007—he is blunt: “They made a great decision, I made a great decision; it was just perfect timing. And to give senior management credit, they gave me a lot of flexibility.”
That flexibility allowed Mr. Klett to do what he does best: close deals. While that also smacks of cliché, he is very serious about it.
“His word is his bond,” Mr. Greenbaum said. “If he says [a deal] will close in seven days, it will close in seven days.”
This approach has won Mr. Klett and Signature an incredible amount of return business. He just closed a loan on an 83-building portfolio for A&E Management, he said, and a 36-building Queens portfolio for the same borrower last year. His bread and butter are the quiet giants of New York City real estate—the longstanding real estate families with medium to large portfolios who prefer to keep a low profile.
He also does business with big name borrowers like Jeff Sutton, the retail maven, and Jon Estreich, a mezzanine lender and owner who works with Mr. Klett as both borrower and lending partner.
The key? Responsiveness, and of course, being good at math.
“If your deal fits into their bucket … they always are responsive,” Mr. Estreich said. Mr. Klett is always willing to get on the phone, his borrowers say. But he also knows right away if the math on a deal won’t pencil out, and he won’t waste anyone’s time pretending that that deal will ever close.
“George Klett is all you can ask from a banker,” said Mr. Sutton, adding that he is “reasonable, reliable, loyal and a man of his word.”
He’s essentially the reason that Signature has become such an active multifamily lender.
“They weren’t really a player,” said Alan Perlmutter, a colleague of Mr. Greenbaum and fellow co-founder of GCP, of Signature. “Until he came along.”
Signature’s brass has largely stepped back and let Mr. Klett mold the bank’s commercial real estate lending practice into a massive presence in the multifamily space. In fact, in the entire $14 billion portfolio he’s assembled in seven and a half years, there are no nonperforming loans, Mr. Klett and other sources confirm.
“They give him incredible latitude,” Mr. Greenbaum said. “He sometimes says, ‘If I were king…’ and I think, ‘C’mon you are king.’”
Back to the early 1970s, though. Think gas lines, headlines like “Ford to City: Drop Dead.”
Mr. Klett eventually got a job selling homes in the Bronx. Often he picked up a second job to provide for his family—but since his first taste of brokering deals, he has always worked in real estate.
After four years selling homes, Mr. Klett signed on as a mortgage officer at Fourth Federal Savings Bank. He later cut his teeth at East New York Savings, which was acquired by M&T Bank in 1986, and where he worked until 1992, eventually as the head of commercial real estate lending.
When he was approached by North Fork Bank in 1995, he had no idea there was even a bank by that name on Long Island, first assuming that it was a Norfolk Bank, in Norfolk, Va., that was interested in him.
But once he made the move, he made his mark.
North Fork, which had nearly gone under in the 1980s, acquired 14 other banks while he was there, and Mr. Klett managed a team of 70. Many of them made the jump with him in 2007 when he moved to Signature.
He left M&T because of concerns about the quality of service he could offer given the personnel and procedural constraints he was faced with. This would prove to be a recurring theme in his life.
“The politics started getting to me [at M&T]”, he said. “They brought in somebody I didn’t like. I started to worry about my reputation.”
Mr. Klett also left what he admits was “a very lucrative job,” at Capital One in 2007. North Fork Bank had been bought by Capital One six months before, and that firm, then a credit card company, didn’t always put speed and loyalty ahead of procedure.
“It’s more managerial [at Capital One]”, Mr. Klett said, with tons of “procedures and policies.” Eventually, he worried he couldn’t serve his customers properly and opted to leave.
“I resigned from there [and] people thought I was crazy,” he said of his July 2007 departure.
There’s very little mincing of words about his former employer. “Unfortunately, [Capital One] didn’t understand real estate,” he said. Although when he left and took many personnel, including administrative support staff, the bank did not blanch.
He hadn’t meant to land at Signature. First, Mr. Klett assumed he would go out on his own, as he had before, working as a broker and investing in his own real estate. But as the financial crisis worsened, he decided it was a great time to be a portfolio lender, picking up the pieces that the securitization craze had left. So as other banks fell, Signature ascended.
The decision to preserve his reputation, even at a financial cost, has worked out well. His reputation has been proven to be a precious commodity. Now, there’s a term in the industry—the “cult of Klett”—referring to borrowers who’ve worked with the banker and always call him first.
“He is always focused on the individual as much as the property,” said Mr. Greenbaum. “He’s more likely to do something out of the box for a sponsor than the perfect transaction that looks great on paper.”
Mr. Estreich seconds that. “It’s not like he does every deal; it’s not like he’s a pushover,” he said. “But he is one of the few people that still believes in the sponsorship.”
And yet, his transactions still look good on paper. That’s because Signature doesn’t try to beat other banks on rate, but rather on customer service, Mr. Klett explained.
But compared to many lenders with a larger appetite for risk, especially CMBS and alternative lenders, Signature is remarkably careful.
“We don’t lend more than 75 percent of internally appraised value,” Mr. Klett said, “and that’s more conservative than the outside appraised value.” He also doesn’t give a five-year rate lower than 3.375 percent, he said.
There are things going on in the market today that worry Mr. Klett, of course. Sky-high prices for New York City multifamily assets are making him “a little nervous,” and stress testing and other onerous requirements that are part of Dodd-Frank and other financial legislation are a pain.
Still, what he learned from his first boss, the grocery store owner, is what has been most important in his life and business. Hard work with a smile is what a grocer needs to provide, and, as Mr. Klett has found, many want the same from their bankers.
“What I love about George, and it’s a dying breed, [is that] it’s all about relationships,” Mr. Greenbaum said. “I am able to pick up the phone and talk to a human being. And when he says something is going to get done, it gets done.”
In fact, while Commercial Observer chatted with Mr. Klett in his spacious office, looking at photos of the Bronx in the 1970s, an email came in from a borrower, apologizing for going with another bank. That bank, which he declined to name, had given the client a rate he couldn’t refuse—1.84 percent over Libor.
Mr. Klett was not angry with the would-be client. He seemed to find the email quaint and the rate absurd.
“You cannot make money on that,” he said. “They can’t compete on service so they compete on rate.”
It’s hard to argue with the bevy of happy borrowers.
“We’ve done hundreds of millions of dollars worth of transactions with them,” said Mr. Estreich. “And never been let down.”