Reflecting on a Tumultuous Year: Q&A with Meridian’s Helen Hwang

Like most executives in New York’s real estate industry, Helen Hwang had not expected 2020 to usher in a global pandemic.

But once the initial shock wore off, the senior executive managing director at Meridian Investment Sales and her team figured out effective ways to surmount the challenges presented by COVID, and arranged several significant transactions, including the sale of One Union Square South — the first major institutional multifamily deal to have negotiated, signed, and closed in New York City during the pandemic.

We spoke with her to learn more about getting deals done amidst the chaos, resilience strategies, and lessons learned during a year of immense upheaval.

Commercial Observer: The lockdowns in the spring forced a blending of personal and professional lives, given the need for remote working and home schooling. So, let’s start with your personal experience: Where did you quarantine and how did you spend your time?

Helen Hwang: I quarantined with my family and family friends in my home in New Jersey. During the shutdown, a survival instinct kicked in, and I was working 14-hour days, checking in with team members, family, friends and clients. I also helped several Korean business owners, who didn’t speak English, complete [Paycheck Protection Program] and [Economic Injury Disaster Loans] applications, and I obtained organic certification for the family farm. Staying busy kept me focused on the future during the toughest days of quarantine.

So how did you adjust?

We knew that we had to maintain discipline, so we began each morning with a call on Zoom. We used this time to check in with everyone, as well as review live transactions, discuss everyone’s workload, and strategize for the day’s calls and deliverables. The quarantine gave us an opportunity to reassess the way we work together to best service our clients.

Numerous businesses in New York City are still operating remotely, but Meridian reopened its offices in June. How did you manage your team’s return?

My team and I spoke frequently and openly about returning to the office once quarantine restrictions were lifted. We discussed commutes, home schooling and general levels of comfort in returning. We reviewed the protocols and measures Meridian was taking to ensure employee safety, so I was able to allay concerns. My team also knew that I had been back in the office daily since May to “test drive” the new environment. I couldn’t ask my colleagues to come in without personally verifying their safety.

My entire team returned to the office the moment NYC entered Phase II of the reopening plan, and it was such a phenomenal feeling. We had a renewed sense of trust, camaraderie and pride. The initial months of the pandemic were extremely challenging, but our determination and constant communication actually brought us closer together. We managed COVID as a unit.

Parts of the real estate industry seem to be in a holding pattern, yet your team has executed significant deals over the past few months. How did you approach these? 

COVID presented the industry with the perfect opportunity to spin its wheels and get nothing done. We didn’t take the bait. Instead, we rolled up our sleeves, focusing our efforts on uncovering opportunities in two categories: deals where the owners were motivated to sell, and situations where buyers felt some near-term pressure to deploy cash.

During the lockdown in April, we focused our attention on canvassing foreign family offices. Our instinct was that they would likely be the most willing and able buyers as the market was changing. Offshore capital, especially from private family offices, is always seeking safe haven investments and opportunities for wealth preservation. Motivation increases during periods of uncertainty, and private family offices gravitate toward the U.S. market, and New York in particular, which they view as transparent, liquid and stable compared to their domestic markets.

Even though we had narrowed our criteria, we still had our work cut out for us. Generally speaking, every stage of a deal took about five times longer than usual and required five times the effort. None of this was easy, but it became clear to me and my team that if we pushed ourselves and our deals through amidst a pandemic, we could redefine what is possible.

One of the transactions you completed was the off-market sale of One Union Square South for $211 million. Can you walk us through its progression?

It all started with a call to Jeff Blau of Related [Companies] about a month before the quarantine began. We negotiated the [purchase and sale agreement] and completed due diligence during the lockdown.

But the timing wasn’t the only significant aspect of the deal: consultations with our client, MKF Realty, involved many executives across Meridian. With the market moving dramatically and things seemingly changing by the hour at times, there were several moments when we had zero clarity on potential debt terms, building occupancy, net effective rents, retention, absorption rates, which are some of the most important metrics for properly evaluating an opportunity.

At one critical point, Meridian’s Chairman Ralph Herzka, President Yoni Goodman, and Rael Gervis from our mortgage brokerage division joined me on a call with MKF. We had an honest and open dialogue about what was happening in the market and where we thought we may end up in the coming days, weeks and months. It was a moment that we could collectively leverage our knowledge and expertise to advise our client honestly and effectively on some very important strategic and operational decisions.

I imagine you had to have some tough conversations during the pandemic given the market fluctuations.

Yes, but that’s part of our job. We see our role as the objective third party that bridges the gap between the expectations of sellers, who may be emotionally attached to their assets, and buyers, who are underwriting in a time of unprecedented uncertainty.

As deal timelines were extended and property economics shifted in the midst of the pandemic, buyers came back with revised projections, and sellers felt that they were being re-traded. But, in many instances, this wasn’t the case, and buyers were simply doing a mark-to-market adjustment to how the property economics are changing.

How can we have a meeting of the minds when the property income continues to fall every month? These are the sorts of scenarios we navigate, and our aim is to provide real guidance that is driven by logical, financial considerations.

Of course, we’re always happy when a sale goes through, but I don’t go to bed at night preoccupied with the broker league tables. Our team is long-term oriented and focused on providing the best advice and service to the client at any given time. If a client can hold, we encourage them to hold; if there is distress, we try to find the best solution for them, whether it’s a potential workout, refinancing or recapitalization.

We often call on our debt colleagues, or Silver Eagle Advisory Group, our affiliate that specializes in debt workouts, because a workout should be the first option for the sponsor. Given the impact of COVID on property values, we view a sale in today’s market as the last resort. We’ve even gone so far as advocating for our team to become a client’s asset manager in order to postpone a sale.

Meridian provides asset management services, too?

Not formally. But members of my team have property and asset management experience, and we had been effectively helping one particular client asset-manage their property during our assignment period by taking a very granular look at operations and leasing.

We saw things could be improved, so we held weekly calls with the property manager, head of leasing, architect, and general contractor. We felt that we could bring the income back up through continued, close attention to asset management; but, ultimately, the owner chose to transact now.

How are you preparing for the near term when the market, as you have said, still remains unpredictable?

Activity has actually improved significantly in the last month or so. We are handling something like five to 10 BOVs (broker opinion of value) every week. Our approach is always evidence-based. During the quarantine and afterward, I was constantly on the phone with clients, investors, landlords, leasing brokers, lenders, and asset/portfolio managers to find out what they were experiencing. I always had an up-to-date and comprehensive picture of the market to inform the BOVs.

Our BOVs are not meant to be one-off exercises. Typically, we show clients our methodology and assumptions, and then delve into granular data during a series of discussions. It’s a process.

What lessons have you and your team learned during the pandemic?

As they say, you shouldn’t let a crisis go to waste; every crisis comes with an opportunity to learn and grow.

The first lesson we learned is to be nimble. The pandemic presented a great deal of stumbling blocks for real estate transactions because of the lockdown and social distancing. We quickly pivoted to virtual tours and FaceTime meetings when in-person tours and negotiations weren’t feasible. Our team has always been adaptive to everchanging market conditions, and in recent years, we have adjusted our marketing process and approach to valuation to better serve our clients.

The second lesson we learned is the importance of creativity. If we’re addressing a large gap between the bid and ask, we look at a wide range of options, such as restructuring/recapitalization through debt or equity, joint venture with a hope note, sale leaseback, installment sale, or even carving out certain components of a deal (ground lease or retail condo).

Finally, persistence goes hand-in-hand with creativity. You can’t sit still and hope that the market will take you where you want to go. It’s difficult to close deals these days when occupancy is falling and bringing income down with it. But you have to keep working toward a meeting of the minds. This is not a market for a quick “deal or no deal.” It’s a process. Persistence is key.

What are your expectations for 2021?

I think 2021 will be another challenging year, but now that vaccines have been successfully developed, I see a clear and bright light at the end of the tunnel. It’s just a matter of time. We have to hang tough for now, both personally and professionally. We have to maintain our focus and determination.

I view 2021 as an ideal time for buyers and investors to acquire assets. I’m not convinced that the distressed deal flow will be as strong as most people believe. In some sectors, yes. We should see more hotel and retail distress surface, as well as Class B and C office and residential assets held by owners who are not as well capitalized. However, Class A assets owned by blue chip sponsors will hang tight and come out OK.

I’ve seen, time and again, that it’s impossible to time the market perfectly. Sure, you can play it safe and ride out the pandemic, but the flip side is the huge opportunity cost when you miss the chance to invest in a great asset at a very attractive basis.

Remember 2009 and 2010? Numbers did not pencil on paper then, either. I believe it’s best to invest now, riding the down wave and focusing on all-in price per pound. As they say, be fearful when others are greedy, and be greedy only when others are fearful.