Rob Rubano Is Cushman & Wakefield’s Secret LA Weapon

The C&W executive managing director is at the forefront of some of the West Coast’s biggest debt deals, though he’s not exclusively California-focused, having also been part of the C&W team who represented Related Companies in its $2.2 billion acquisition of a gigantic office condominium at 30 Hudson Yards, negotiating $1.4 billion in debt.

Formerly with Eastdil Secured, Rubano moved to C&W in late 2018 and got off to a flying start with his team racking up $4.9 billion in originations in his first year alone. 

In a fiercely competitive lending environment, Rubano has his work cut out for him matching high-profile projects with the perfect capital. Commercial Observer took the opportunity to chat with him in December to learn more about what’s drawing dollars to the City of Angels, which lenders are winning deals and where the trouble spots are hiding. 

Commercial Observer: How did you get your start in real estate? 

Rob Rubano: I actually have a mechanical engineering degree. I went to Virginia Tech [for] undergrad and played soccer there. After I graduated from school in the mid-‘90s, I was in D.C. for a short period of time, then moved out to the West Coast and went to graduate school at UCLA. I got my MBA there and that was really a conduit to me transitioning into a real estate career. I started at Eastdil Secured when it was still Secured Capital in 2005 — Eastdil bought Secured Capital in 2006 and the debt platform of Eastdil Secured really came from Secured Capital — and I was at Eastdil for a little over 13 years helping to run the debt placement business. I was a managing director, based in L.A. and focused largely on the Bay Area and Pacific Northwest, but, similar to what I’m doing here at Cushman, we worked all over the country. 

How did the move to Cushman & Wakefield come about? 

As you know, some of my former Eastdil partners — Doug Harmon, Adam Spies, Adam Doneger, Kevin Donner and Josh King — all made the move here a little over three years ago, in October 2016. I was close with those guys and spent a lot of time working with them. After their non-solicit expired, Doug called me. He said, “Hey, let’s get together, I’m going to be out in L.A., and I’d love to see you.” So, he came out and we started the conversation. They wanted me to come over and really push to grow the national debt placement business. 

Were you looking to leave at the time? 

No, I was pretty happy where I was, to be honest with you, but if there was ever going to be a reason to leave this was going to be it. So, I made the move in October 2018 and it’s just been phenomenal. We’re global — 55,000 people around the world, and in so many different countries — and really just with best-in-class leasing, tenant rep and valuation services. With all of the benefits of a larger platform, we can focus on a platform-within-a-platform and grow the institutional business, both on investment sales and debt placement sides. The synergies sounded obvious to me and I really bought into Doug and Adam’s thought process. I had high expectations when I made the move, and it’s surpassed all of them. When I came over that October, I immediately started hiring and I have now built teams in L.A., Dallas and San Francisco. We closed our first loan in June 2019, and we did $4.9 billion in debt last year — which was pretty good for six months — and it’s with all the same clients I was working with at Eastdil for the most part, such as Blackstone, CIM and Starwood. So, a lot of the same institutional clients — and that’s really what I’m focused on. 

What’s your team’s average loan size today? 

It’s probably somewhere around $150 million, which is consistent with what our average loan size was at Eastdil every year. That’s kind of where we tend to traffic, just given the client base that we’re spending our time with.

We’ve seen a lot of New York firms doing deals in L.A. Is this an increasing trend? 

From a macro level, there’s around $17 trillion of negative-rate bonds across the globe right now and it’s been such a fascinating time here domestically; we’ve continued to have modest growth, we have record-low unemployment and inflation has been relatively in-check. I think just from a capital flow perspective, the U.S. continues to be a flight-to-quality destination and capital is chasing growth. The largest demand-driver we have growth-wise is the tech economy, and while it’s becoming more diversified it’s still relatively anchored on the West Coast. So yes, the answer is we’ve seen a lot of capital, specifically New York high-net-worth family capital, flow to the West Coast in general and L.A. specifically, and I think you’ll continue to see that. 

If you go to any conference panel discussion the constant message is that New York remains a safe haven for foreign capital. Do you think that’s also true of L.A. today?

I don’t think I’d quite put it on par from that perspective.  New York’s just a much bigger market. I do think the perception of L.A. has changed significantly over the last seven to 10 years from a global perspective, in that L.A. is much more of a global city today than it was 15 years ago.  But you still don’t have the same level of diversity of economic drivers. You certainly have more tech and you have the need for content and digital media, but when you look at Downtown L.A. — the traditional financial district — there’s still considerable vacancy there. It’s a different story when you look at the Westside of L.A. where vacancies are incredibly low and “Silicon Beach” — Marina Del Rey and Venice — where there’s a concentration of tech. Same story with pockets of the Arts District. But what’s the economic driver that’s going to change the tide in Downtown L.A.? It’s not obvious. The U.S. is still the absolute flight-to-quality safe haven globally. But New York is still the first thought for investors. I will tell you however that we have seen a lot of that foreign capital fly right over New York and head to the West Coast. I think traditionally you used to see more Asian capital come West, and more European and Middle Eastern capital coming East. And over the last five to seven years, you’ve seen a lot more European and Middle Eastern capital come to the West Coast. 

Is L.A. as competitive a market as New York is when it comes to winning deals?

There’s not a balance sheet lender of any significance in the market today that is not focused on the West Coast, so Southern California, Northern California, the Pacific Northwest; all these markets have strong underlying demand drivers. But every market is competitive today. We’re financing a deal for Blackstone in Nashville and one in Austin for KKR right now that are priced incredibly tightly. I think the story of the aggressive nature of the market and the competitive landscape transcends being New York-specific. There’s just a lot more debt capital available than there are good transactions.

In terms of L.A. submarkets, where’s piquing lenders and investors’ interest? 

I think the obvious one is the Arts District in Downtown L.A. It’s been the area that everyone is focused on; it’s about 50 square blocks with a significant amount of that going through the entitlement process for redevelopment. You’ve seen a lot of smart institutional capital very focused on it and land prices have already gone way up. 

Are there any areas of market distress worrying you right now? 

There are specific cases of distress here and there that you can point to in various markets around the country but, by and large, L.A. is not a market I would point to and say, “We’re seeing real cracks.” This cycle has been an active one and you can look at deals and say, “Man, how does it make sense that a lender is financing a transitional office deal with no cash management for five years? That feels like 2005.” But underwriting is still in check, and people aren’t over-leveraging assets.  I get calls from guys all the time saying, “Hey, is it too early for loan sales? Are you guys seeing anything on the note sale side?” And I think the general answer is it’s definitely too early for that.

What are the key lessons learned from the crisis, in your opinion?

There’s a bunch of things that are different today compared with what we saw in 2005 and 2006 into 2007. Underwriting is much more prudent, and lenders aren’t leaning into vacancy the way that they did. Back in the CMBS 1.0 days, buyers were paying for vacancy, and lenders were accepting it. So, they were saying, “We know you’re 70 percent leased so we’re basically going to underwrite our in-place today, giving credit for that lease-up.” Well, that’s not the way it works today. Lenders are underwriting today, looking at in-place debt yields based on what’s happening at the property today. They’re funding loans day one that are reflective of what those metrics look like. Look, I think for the most part the bank market is a 60- to 65 percent of cost or value market, the debt fund market is a 75 percent loan-to-value market. The subordinate part of the market is very deep right now because people are searching for yield. But the mortgage lenders are much more conservative in nature, so I think that’s a big difference.

What’s your take on the CMBS market right now as a competitive financing source? 

Given where spreads are today, we see the CMBS market as very competitive on the large loan floating-rate side. The CMBS market is absolutely a necessary market, especially for the large loan side because in a lot of cases it’s the only execution. For example, when you’re doing a billion-dollar financing are you really going to piece together five banks or three life companies in a club deal? It’s a lot easier to have that one-stop-shop. 

With speed of execution as a big calling card for lenders today, how are the banks competing against the debt funds? Have they stepped up their game?

It’s a fascinating question and I have a whole opinion on the bank market. Let’s go back a few years. The bank market in my view was suffering in terms of decreasing net new origination volume because they were losing business to the debt funds. I always held the belief that the banks were going to have to figure out how to be more responsive and, in my mind, that’s exactly what has happened. As the debt funds were getting a higher advance rate and lower spreads on repo and warehouse lines, they continued to get more and more market share. I feel like the banks have become more competitive over the last 12 months and we’ve been doing a lot more bank origination. And have they moved quicker? In some cases, yes. In some cases, no. They have a credit process that they have to go through and what happens is you begin this process, but you never know who’s going to opine on that loan and want to put their two cents in. So, when we have a deal that has a really expedited timeline and you have the bank market competing against the debt fund market, [the outcome] depends on whether the borrower has existing documents in place with that bank already. If you don’t have existing docs, that’s a new relationship with the bank and nine times out of 10 I’m probably going to advise the borrower to go with the debt fund, unless there’s a real reason why I feel otherwise.

What do you do for fun in L.A. when you’re not wrangling the debt markets? 

I’ve been in L.A. for 20 years now and I have a wide network of friends. The lifestyle here in Southern California is driven by the weather first and foremost, right, so you’re just always outside, whether you’re hiking or running or golfing.  I live a very active lifestyle. I grew up in Pittsburgh and I’ve spent a lot of time in New York. I love New York, but there’s something about the Southern California lifestyle that has really anchored me.