In Syndication: Credit Agricole’s Karen Ramos Makes Lending Waves Post-COVID

Now, as a managing director of loan syndications and co-global sector coordinator overseeing real estate lodging and gaming for Crédit Agricole CIB, Ramos is closing some of the biggest loans in the market, despite a global pandemic.

In June alone, the French bank — together with Aareal Capital and Citigroup (C) — sealed a $510 million mortgage for SL Green (SLG) Realty Corp.’s News Building, as well as a $500 million refinance for Brookfield (BN) Properties and Douglas Development’s 655 New York Avenue in Washington, D.C. (together with Standard Chartered, Helaba and BayernLB).

The common theme in these two loan syndicates is the presence of foreign banks, a trend that was evident during peak-COVID-19 closings, and one that Ramos continues to see.

Commercial Observer: You grew up in the Philippines?

Karen Ramos: Yes, I was born and raised in Manila in the Philippines, and that’s where I went to university. My undergrad was business administration, but I specifically did not want to be a banker when I was in college. I was more interested in the travel industry and I wanted to be a flight attendant, but I wasn’t tall enough [laughs].

So, I ended up working in hotel operations and that was my first job out of college. I worked for the Intercontinental Hotel in Manila as a guest relations officer, basically taking care of VIP guests, then eventually became the guest relations manager, managing the officers and the butlers. It was a little strange, as I was in my early 20s and probably didn’t know what I was doing. But, that’s how I got started.

I did have a brief stint with United Airlines after that, in Manila. Not as a flight attendant, but in reservation sales. In those days, you couldn’t do online booking, so you’d have to go through a travel agent or call the airline company directly. I enjoyed that, but I got pulled back to become a manager of the hotel.

After that, I moved to Hong Kong and worked for a Canadian hotel consulting firm called PKF Consulting. Basically, we did market feasibility studies and appraisal reports, mainly on hotels, but I also got involved in resorts, retail and, often, golf courses. I worked there for about five years and had the chance to travel across Asia Pacific and help developers and owners of these hotels and golf courses, or mixed-use developments that had hotel components or golf courses.

So, I was exposed to the real estate world, but I really wanted to learn more about the finance side of it. So, I ended up working for PricewaterhouseCoopers in Singapore, and then received my master’s in real estate in New York at New York University. That solidified my real estate knowledge and expanded my horizons beyond just hotels, because I had been more of a hotel expert previously.

What appealed about the finance side?

What I liked about the debt and equity side was that it determined whether a project was financially viable or not. So, you can study the market and do all these studies, but if you don’t have the money to finance it, both in the form of debt and equity, the project will not take off. Even once the project is built, you have to make sure that it’s financially viable. To me, that was the interesting part.

After graduating, I ended up getting into banking, as opposed to the equity side. I worked for an insurance company called Mutual of New York [now AXA Financial], and then I worked for GE Capital for three years. I first did two years of portfolio underwriting for the debt and equity positions of GE Capital real estate, which exposed me to different markets across the country, and, in the third year, I moved to syndication.

Were you interested in the syndication side?

I was interested. I’d interviewed for the loan syndication position when I was a fresh grad from NYU, but I didn’t get the job. But I met some people [during the interview], and when I was hired within GE’s underwriting group, I kept in touch with them. One of the people in the syndications group got promoted; actually, you know him: Jerome Sanzo [now head of real estate for the Industrial and Commercial Bank of China]. He was a VP when I interviewed, and then, eventually, he became the head of the syndications group. When he became the head, he asked me to apply.

So, Jerome was instrumental in bringing me over to the syndications world, and I’ve kept in touch with him since. He’s one of my mentors and he’s such a smart guy. From GE, I moved to ING [Group], which is a Dutch bank, and I worked there for almost eight years. I was in an underwriting role for a year, and then in the second year, I set up the syndication desk for real estate.

I left ING in 2013 and was promoted to the director level at Capital One, where I was able to work on — in addition to your typical senior secured term loans or project loans or mortgage loans — more on the corporate facilities for REITs and funds. And, in 2016, I was recruited to join Crédit Agricole. I’ve been with the bank now for four years, and the interesting part is, Crédit Agricole  is a big hotel lender — I would say a third of the portfolio is hotels — so I went full circle with my career without planning it.

What appealed to you about joining Crédit Agricole ?

I like the fact that it’s a global bank. We have a presence in over 50 countries. Within real estate, there are nine offices globally; so, four in Europe, four in Asia Pacific, and one in New York that covers both the U.S. and Canada. So, I like the global reach, global perspective, and the fact that we attract global talent. For me — being a foreigner myself — I feel like I really belong in this environment, where it’s very open-minded and collegial.

My number one priority is the U.S. and Canada deals, but I’m also the co-global sector coordinator. What that means is, we have nine different offices for real estate globally, and teams on the ground do work on the deals themselves, but I get involved in giving my views and opinions about their deals to the extent they need help in figuring out which investors to tap into. I like the fact that I continue to see deals from Singapore and Hong Kong, since I lived in those countries. It’s also nice to be part of a team that’s very diverse and cosmopolitan.

Is there such a thing as a typical transaction for the bank today?

Pre-COVID, our focus in the U.S. was office and hotels with a bit of retail, multifamily, logistics and gaming. The strategy of the real estate platform is prioritizing global, strategic clients. And, for us, the cross sell also includes from one country to another. That strategy has proven critical in today’s market, where clearly there’s a softening across the board, especially in hotels and retail. I’m sure you’ve heard that a lot of borrowers have asked for interest deferral. Most, if not all, of our clients have the financial wherewithal or deep pockets to pay their interest. That’s important, because you want to get paid. It’s more and more important that we know the clients can deliver and will do the right thing. 

So, a typical deal for us starts with sponsorship, with the client. Secondly, we tend to be — and this applies both pre- and post-COVID — conservative in what we’re looking at, and target trophy or Class A type assets. For office, we tend to look at the top eight MSAs [in the U.S.]. And for hotels, we tend to look at the top 20.

For hotels, we focus mostly on business hotels, some of the airport hotels and convention center hotels. We were never big on resort hotels because we don’t  want to take natural catastrophe risk. Post-COVID, I would say our focus is more on office, logistics and multifamily. Clearly, hotels and retail are on pause right now for most lenders. We do have exposure to retail, and the type of retail that the bank likes is what we call High Street retail. We like the more luxury, Class A-type assets.

How has your loan portfolio fared during COVID?

Surprisingly well, but we are keeping an eye on our portfolio, working through waivers and amendments. So far, we have not had any loan in default. Crédit Agricole  has always been very much focused on sponsorship — particularly, investment grade or credit quality, global institutional sponsors that have a diversified, global footprint. The quality of our sponsors and assets, and generally conservative, low-leverage loan structures, have helped our portfolio perform relatively well through cycles over the past 30-plus years.

How would you describe your lending activity through the pandemic?

We’re probably one of a dozen lenders that have been consistently active since the beginning of the pandemic, either as a lead bank or as a participant. Our priority is to be supportive of our clients, because, right now, there aren’t a lot of lenders that are active. We’re one of the few banks that is actually getting deals approved and teeing them up for closing.

Now is the time that you need to support your clients, and liquidity is difficult to come by these days. As I mentioned, our clients tend to be global names that have deep pockets, so we know they have a track record in developing and managing these assets, and we believe that they will do well as the market continues to be challenged.

How was the experience of closing deals remotely during the pandemic?

In the beginning, it was a little tough. Even simple things, like getting signature pages, were difficult, and we had to figure out how to collate signatures for loan documents remotely.

655 New York Avenue was actually a pre-COVID deal. Crédit Agricole was mandated right before COVID in February, in syndication market during the peak of COVID, and eventually closed in June.The deal was ultimately oversubscribed, and distributed to seven other banks despite COVID market dislocation. The bank group morphed over time as the appetite of banks kept changing because of a lot of nervousness in the market, and fear of the unknown. There were a lot of ebbs and flows. Remember that a lot of the banks in the bank group are foreign banks, so they’re reading the news from afar, relying on what’s on television and online. It took a bit longer than expected as we were supposed to close the loan in April, but we ended up closing in June , still quite an accomplishment given the market context.

I think we closed at least six or seven deals through the COVID-19 [lockdown], and they were fairly large deals with prominent names. So, I’m really happy about that, because we have a good pipeline and we’re remaining very supportive of our clients, while still being conservative and doing what’s best for the bank.

We’ve seen a lot of foreign banks in syndicates during the pandemic.

Absolutely. Of the deals we’ve done recently, I would say 99 percent included foreign banks. I think, for the most part, the U.S. money center banks are on pause. If you see them leading a deal today, it’s because they started working on that pre-[pandemic] and it’s already grandfathered in. Even the regional banks that are doing deals are still few and far between.

I think the majority of banks are still really focused on their portfolio management. First, there was an onslaught of revolving credit facilities being drawn, because a lot of REITs needed liquidity, so they were busy with that. And then, the next request was financial covenant waivers, so banks got bogged down with covenant request amendments. And, then, of course, there were interest referrals. So, combine those, and I think a lot of U.S. banks just needed time to focus on their portfolio and get their arms around what the issues were, and it’s still not over. 

Which foreign banks have been the most active through the pandemic?

I think, for the most part, the Germans, the French and a handful of others. There are Irish banks that take small tickets, and some of the Middle Eastern banks are still active — I’ve seen them take $50 to $75 million chunks.

For the ones that are doing deals, the ticket size has also been reduced; everybody seems to have cut back by at least $25 million, and it’s very hard to determine who’s active and who’s not. People on the ground think they can do a deal, but once it goes up the chain — depending on the status of what’s going on in the market and in the news sometimes — they suddenly become conservative.

My job is an art and not a science; between the [loan-to-value], the debt yield, the covenants needed, the reserves, the guarantees, and all of that combined. And, of course, every deal is different.

You were at ING during the last crisis. Are you seeing any interesting changes in behavior from lenders this time around?

During the last downturn, the banks were in trouble. There is a lot of nervousness again today, but it’s a different kind of nervousness. This time, the banks are much more solid and prepared for the downturn. We were able to weather the storm this time around because of the capital and systems in place, and rise to meet the challenge. Operations-wise, when I was at ING, we didn’t do any new loans for at least 18 months. We all hunkered down and did portfolio management. This time around, we never stopped doing deals.

Given your hotel background, do you have any expectations around the hospitality sector’s recovery?

The luxury and the convention center hotels are the ones that are badly affected. In the summer, some of them opened up, especially the ones that are drive-to destinations. I actually went on vacation in August. I went to Massachusetts, Cape Cod and the Jersey Shore, and some friends went to Rhode Island and Maine. So, those drive-to destinations, while they are not at pre-[pandemic] levels, they’ve performed better than expected. Maybe they were expecting less than 20 percent occupancy, but I hear they’re now above 20 percent, and during Labor Day weekend, they went as high as 60 percent. So, not pre-[pandemic] levels, but I think it’s promising as there’s a little bit more activity. The issue is whether there’s a big uptick in the fall, and that’s a big question mark. But I think we’re getting used to the idea of wearing a mask everywhere we go.

So, I think the hotel sector will bounce back. It will take a while, and probably two or three years to fully recover but I’m very hopeful and positive. The food and beverage and the dining experience will change. The hotel buffets won’t exist, and it’s a shame because my kids love those breakfast buffets [laughs].

What’s your favorite part of the job today?

I view my role as an adviser, and I like the fact that I’m constantly talking to other investors. I really like the collaborative dynamic. When I look at a deal, I always think about how other investors would look at a loan, what their hot buttons are, and what they’d need to be comfortable with any risks involved.

I’ve worked with [many of those lenders] for 10 or 15 years now. Most of them, we’ve never worked in the same institution, but because we’ve known each other through different deals we’ve worked on, it’s almost like a club, and you get to really know people. So, that collaborative energy just works.