The Lenders Who Kept Calm and Loaned On
Back in June 2020, we would have said that putting out nearly a billion dollars to finance the purchase of a sprawling movie studio portfolio was … well, we don’t want to use words like “nuts” or “psycho.” Would “imprudent” be more polite?
It turns out it wasn’t psycho, or even imprudent. The proper word is “bold.” Both Barclays (BCS) and Goldman Sachs (GS) proved their moxie (and their keen intelligence) when they teamed up to loan Blackstone (BX) $900 million for the purchase of a 49 percent stake in Hudson Pacific Partners’ Hollywood Media Portfolio, a 2.2 million-square-foot behemoth consisting of some three studios.
“Getting that first deal back in the market and proving that there still was bond buyer demand — because that was a question mark at the time — was important to the overall market coming back, so that is something we’re really proud of,” Miriam Wheeler, a managing director at Goldman Sachs, told Commercial Observer. “Had we not tested the waters, it might have taken much longer for the new issue market to come back and, therefore, liquidity to return for borrowers.”
Of course, neither Goldman nor Barclays was executing some sort of one-and-done approach. In September, Barclays closed a $483 million commercial mortgage-backed securities (CMBS) financing of Sotheby’s New York headquarters. And, in December, they put out another three-quarters of a billion dollars when they wrote the loan to KKR (KKR) for their big acquisition from High Street Logistics Properties of 9.7 million square feet of industrial properties spread across seven markets. Meanwhile, Goldman led a massive $900 million refinance on Veritas and Baupost’s multifamily portfolio in San Francisco.
These were the notable “canary in the coal mine” sorts of deals for a lot of lenders. While the Federal Reserve was doing all it could to maintain confidence in the future and while rescue packages were making their way through local, state and federal governments, it was psychologically difficult not to hold back. Businesses were collapsing at a rate unseen in decades and the death toll was only getting worse.
And, yet, there were some calm forces in lending who saw the path out of the crisis, kept their heads down, and lent on.
Even before the June Blackstone loan, there were headline deals that could have been yet another casualty of coronavirus, but that nevertheless made their steely way across the finish line. In May 2020, CBRE arranged a $972 million construction loan from Wells Fargo (WFC), TD Bank and JPMorgan Chase (JPM), among others, for Oxford’s St. John’s Terminal in Manhattan. It brought a notable sigh of relief that such a deal could still happen. Also last May, Citibank coordinated the $772 million 2020-GC47 deal, the first of its kind since the onset of the pandemic.
Some even looked at the crisis as a decent opportunity to reach for the next thing.
“So, we actually strategically grew our business in that April timeframe last year by getting some dedicated private capital in our direct lending business,” Matt Salem, KKR’s head of real estate credit, said. Last spring, the company raised $4 billion — $450 million of which was earmarked for real estate lending — and increased their assets under management from $3.5 billion on March 31, 2020, to $15.4 billion by the end of the year.
“Mic drop” is perfectly polite here, right?