CIT Group’s Chris Niederpruem on Taking the Helm of What He Helped Kickstart
Chris Niederpruem took over as CIT Group's head of real estate finance a year ago this month. One of his first tests: Dealing with a global pandemic
Prior to COVID-19, the market comprised too many capital providers chasing too few good deals, a scenario CIT Group’s Chris Niederpruem considered “the new normal … I don’t know what changes that.”
Nobody foresaw what would unfold a little more than a month after Commercial Observer met with Niederpruem in CIT’s offices at 11 West 42nd Street in January.
It’s not often you experience a near-apocalyptic event that causes a public health and economic crisis within your first full year of taking over a multibillion-dollar institutional real estate banking practice.
But Niederpruem, 45, was stoic when CO caught up with him a few weeks ago. CIT is first and foremost a relationship real estate lender — and don’t call that a cliché. For nearly nine years since Niederpruem was part of a six-person group that was hired by CIT to kick-start its real estate finance business from scratch, this is how it has differentiated itself, providing a single touch point for its borrowers. Repeat business comprises around half of its activity across the country.
Last year, in an overcrowded market, CIT originated $3.3 billion on its balance sheet, up from $2.9 billion in 2018 and a nearly 47 percent climb since 2016.
CIT has made a name for itself providing construction debt and senior secured loans on value-add opportunities, something Niederpruem previously said has become more difficult in recent years due to the proliferation of finance companies in the space.
But in the last two years, it’s tried to carve a way around that by originating whole loans while selling off the subordinate debt in favor of retaining the senior position, where it has historically lived.
The $163 million debt package CIT and BlackRock originated in March to fund The Arden Group’s acquisition of a 2.1 million-square-foot, 12-property U.S. industrial portfolio is evidence of this strategy — CIT booked a $134.3 million senior portion.
Born into a military family, Niederpruem moved around a lot growing up, living in around a half-dozen locations prior to starting high school; his dad was an attorney serving in the JAG Corps. (Niederpruem has spent the last 20 years in New York, and his wife and four kids are here to stay, he said.) When he was about 8 years old in the early 1980s, his family lived in Seoul, South Korea for about two years during what was a very turbulent time on the Korean peninsula
Beyond that, his family moved around the East Coast and Mid-Atlantic regions, eventually settling in upstate New York, where he spent his high school and college years in Syracuse.
He moved to New York in 1999, after he received his English degree from Le Moyne College, for a two-year stint to “see what it was all about,” he said. He eventually joined a boutique real estate mortgage brokerage shop in the city and then was hired by Dublin, Ireland-based KBC Bank in 2005. After a second stint at another Irish bank, he joined Bank of Ireland in 2008, where he’d meet CIT Group’s former head of real estate finance, Matt Galligan, from whom he took over last year.
Commercial Observer: How did you make your way into real estate finance?
Chris Niederpruem: I found my way into real estate through a college classmate, whose family was in the real estate business. He made an introduction for me, and I got into the business on the mortgage brokerage side. I did that for a small boutique mortgage brokerage in New York, spending a lot of time around the outer boroughs. After a few years of that, I fell in love with commercial real estate. It’s a touch-it-feel-it fixed asset, which is interesting. And other things, like the architecture and the design are interesting as well. It’s a good way to be both in and out of the office. There’s the financial piece of it in the office and then you get out and about and spend time with customers and see the real estate. That’s why I fell in love with it. I’m somewhat conservative by nature, so I wanted to not be in a role where I was dependent on a fee business. So I found my way into banking after a couple of years on the brokerage side.
Talk about that transition, with Matt Galligan, from Bank of Ireland to CIT right after the crisis.
During 2008, my wife worked in financial services. So, the two of us are staring at each other going, “Okay, which one of us is going to lose our job first?” Neither of us [did]. I was close with the Bank of Ireland, and we eventually were selling our loan book, so I was either going to [go to CIT] or be out of work. So, 2011 was an interesting year; we sold our way out of a job as we sold the loan portfolio at the Bank of Ireland. Closed on Friday, joined CIT on a Monday, and three weeks later, my first son was born. It was an interesting month, to say the least. I was sweating a little bit those days.
We met the management team here at CIT through that [sale] process, and they hired us. We were fortunate enough that [Bank of Ireland] allowed us to be part of the sale process, so we were able to meet with some of the more interested groups that were looking at the loan portfolio. When the loan book bid process was over, they said, “Well, we’d still like to bring you on.” They said they wanted to restart their commercial real estate platform that they previously had. So we started here in 2011.
What was it like at the beginning, essentially starting from scratch with no legacy book?
We arrived, wrote a business plan, which we had obviously vetted in advance. And we really started lending in January 2012.
Wow, very quick.
Yes, very quick. We started on October 3, 2011, and before the year was out in December, we closed our first transaction. So we were still finalizing a business plan, and we had already executed on a transaction for a client that we knew and was counting on us for financing, and we were able to deliver very quickly.
How has CIT’s product offerings expanded in the last several years?
The core of our business remains. We’re a value-add and construction lender. In the last [couple years] the market [became] probably the most competitive it’s been since I’ve been in the business. There’s so much capital both on the debt and the equity side, but primarily on the debt side, so you have to try to do some things a little bit differently than everybody else. We’ve stayed the course for the most part. What we’ve done to try to compete with that [debt fund] segment of the market, because they tend to be right in our space of value-add lending, we will also provide a mezzanine product. [We’ll] arrange both a senior loan and a mezzanine loan, which is really where they compete. They’ll originate that loan, and they’ll sell the most senior piece. We’re doing the converse, originating that entire stack and selling the riskier piece out to them. We’ve found some success in doing that. And also, our clients like that it’s a single point of contact [with us]. We’ll originate your loan, lead the negotiation of the documentation and continue to manage that. We’ve found that clients put a lot of value on that, especially after the last cycle. It’s not a huge piece of [our book]. It’s just another kind of tool in the tool belt so to speak. Our biggest value add to our customers is that we are a single point of contact, and we’re able to be a little more nimble, a little more flexible. Our speed and certainty of execution is really what we deliver to folks. The larger the organization, the more red tape you have. We have a very flat organization, so to get a decision made here is pretty quick.
What’s the breakdown of your portfolio by asset class?
The three largest in terms of just directionally is multifamily, office and then industrial are the biggest three in our portfolio.
Tell us a bit about your relationship with Matt Galligan.
He’s certainly been a mentor to me at times since we’ve worked together. I feel like I’ve been through more economic cycles than I have just by spending the time working with Matt. He’s been through a couple more than I have, and there’s a lot of value in that. I’ve learned as much about working in a large organization from Matt as I have about the real estate business, candidly.
He’s spent his career in banking in various large organizations. He started his career at Chase, and he worked at FleetBoston. There is a skill to working in large organizations and navigating the bureaucracy and the politics, and I’ve learned some of that from him. In terms of real estate, I’ve learned about the importance of who you’re lending money to. We talk a lot about sponsorship around here. Do they have the experience, the integrity, the wherewithal to weather a downturn? Or not even a downturn but just a bump in that particular investment or that particular project. At any point, wherever you might be in an economic cycle, that’s terribly important. Matt has said it to lots of us over the years: You want to make sure you’re dealing with good people. Keep it simple. Deal with good people, and you’ll end up with a good outcome.
As a passing of the baton type of scenario, how’s the transition to the new role gone?
It’s an interesting dynamic that we’ve gone through. It’s a phenomenal opportunity for me to take over this business. Life is about timing. I can’t say that when I started 2019 that I thought this was the year that we would pass the torch. He continues to be a champion of mine. He has graciously allowed me to quickly take over running the business. In a lot of places, Matt would retire, and we’d give him his gold watch and send them off, right? Here, he’s around for a bit longer in a new role. He provides me guidance and support when I need it. He will tell you he stays out of my way as much as he can.
What’s something you want to bring to CIT?
One of the things that we started doing in 2019 — and I think we’ll continue to do more of it through the next few years — is elevate the profile of CIT as the lead bank. In the early days in our business, [we’d] partner with other lenders and come in as a participant in other banks’ deals. We’ve slowly transitioned the business to be more of a sole lender. We’ll continue to [try] to take the lead in larger transactions. It provides a broader solution to our customers.
Given CIT’s investment strategy, how has the business been impacted by COVID-19?
We’ve really focused on experienced investors and developers that have the financial wherewithal to weather any economic cycle. We’ve continued to do that through 2019 and up until this point. Because of that, it hasn’t caused us to really change our strategy; it’s tried and true what we’ve built. [And that remains true] even through these uncertain and unusual times.
We are still open for business. We’re still looking at new opportunities. It’s an uncertain time not just for commercial real estate but the economy in general. There will be changes to the different sectors of commercial real estate, so like anyone else who’s an investor or lender in the space, we’re cautiously diligencing any opportunities that we pursue based on changes that have or may come on the back of the pandemic.
How would you describe your experiences with the Great Financial Crisis, versus now?
People say the only thing similar about these events is they’re all different, and that certainly holds true with COVID-19, versus the Financial Crisis a decade ago. This is really broad, sweeping, and it’s first and foremost a public health crisis that’s had financial impact.
We’ve continued to stay the course and try to support both our existing clients and new prospects that fit our strategy. The last several years have been very active in the CRE sector, in investment sales and development. It’s continued but not to the level it has in the past. The marketplace is certainly shifting. It’s a terribly fluid situation. We’ll focus on major markets nationally. The acquisition market doesn’t seem to be completely gone. There are transactions happening. People are still raising money — debt and equity funds are still being raised and deployed, and developers are breaking ground on new projects.