Cerberus’ Neha Santiago Is Building a Different Kind of Debt Platform

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Neha Santiago spent almost a decade at Goldman Sachs before joining Cerberus Capital Management as head of real estate private credit in May 2020. Building out a debt platform from scratch is a tough enough task on a normal day, let alone during a global pandemic. But, the opportunities that the market dislocation presented for a firm unencumbered by an existing loan portfolio meant that she and her team had to get straight to work. So, she hit “go,” and her team has been going ever since. 

Advancing diversity, equity and inclusion (DEI) in the commercial real estate industry was also top of mind as Santiago took her new seat. “For me, my focus was to make it really part of our DNA from the beginning. I didn’t want a team that sat around the table and ‘yes-d’ each other because we shared the same perspectives or experiences or backgrounds,” she said.  

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In addition to making the team better and stronger, its diversity is also a big draw for new hires seeking a more relatable team profile than they’re used to seeing in commercial real estate finance. 

Today, Santiago’s team has closed more than $1.5 billion in transactions, and the sky’s the limit as they continue to grow and scale their business — pursuing savvy market opportunities, while also leveraging the broader Cerberus engine. Commercial Observer caught up with Santiago in late March to learn more.

This interview has been edited for length and clarity.

Commercial Observer: You joined Cerberus in May 2020. That must have been a pretty interesting time to launch a lending platform.

Neha Santiago: When I took the role in early 2020, I couldn’t have been more excited to lead the build-out of this strategy, especially at such a reputable place like Cerberus. Of course, there are always challenges whenever you’re building something new, and for me it was many of the aspects of the role; for example, defining strategy, capital raising, building out the team and putting all of the infrastructure in place. We really built this business from scratch, so you can only imagine the curveball that COVID threw. And while I had certainly been through the global financial crisis and other down cycles, this one was truly unprecedented in so many respects. 

But, we all know that disruption creates opportunity, and I feel that we were uniquely positioned to take advantage of the disruption in the marketplace that was caused by the pandemic — and in a very offensive manner because we didn’t have any pre-COVID exposure. We were sitting on a significant amount of dry powder, so while a lot of our competitors were sidelined working out their existing books, we were able to see the opportunity set through a clear lens, and take advantage of what was in front of us.  

Even though there were still a lot of moving parts in terms of building out the business, we knew that we had to hit “go,” otherwise, we would have missed out on some really great opportunities. A big part of the confidence that I had to get going with the business came from the capabilities that the team brought to the table, the nimble mindset that Cerberus has and the backing of the broader Cerberus engine. 

You left your job at Goldman Sachs for the position. Why was the move to Cerberus the right one for you at that stage in your career? 

I’d been at Goldman for a decade, and I will say, Goldman is an absolutely amazing platform for one’s growth, just in terms of the breadth and variety of the types of deals you get to work on, and certainly the talent of the people that work there. It was my training at Goldman that I think gave me every confidence to take this next step. I had started to get the proverbial itch to do something a little bit more entrepreneurial, and I knew that I was ready. 

I think it’s very natural for people to hit a point in their personal and professional journeys where they start to ask themselves how they can have a bigger impact, and Cerberus offered me a unique opportunity to come onboard and build something from the ground up as part of a larger, world-class platform. Equally important was being able to put something in motion in terms of some of the leadership changes that are really needed in our industry from a [diversity, equite and inclusion] DEI perspective. I knew that this seat was also an opportunity for me to advance those DEI objectives that are personally very important to me.

What were some of the key opportunities that materialized for your platform during the pandemic?

Part of the opportunity that materialized, or was further accelerated, as a result of COVID was just the growing demand for private credit, given its flexibility. As we often see during times of capital markets disruption, there was a real pullback in traditional lending within commercial real estate. So, banks and more traditional lenders were retreating from the marketplace, and we saw growing demand for private credit. I think this period of disruption magnified the value of having slightly more flexible capital for borrowers, so it certainly opened up the opportunity set for the broader private credit markets.

On top of that, we certainly had a heavy focus on asset classes that tend to be a little bit more recession-proof and that demonstrate minimal volatility during periods of uncertainty, so we, like many others in the industry, focused on multifamily and  industrial. 

What does your portfolio look like today, broadly speaking? 

Well over 50 percent of our portfolio is industrial and multifamily, and we really continue to focus on them. We also love the fundamentals of life sciences. We have recently gotten into that space and continue to find ways to expand our presence there. We’re a yield-driven credit strategy, so we’re always looking for asset classes where we can generate yield, and do that in a way that’s thoughtful, and where we’re really leveraging the knowledge of the broader commercial real estate platform at Cerberus. 

So that means looking at, in some cases, complementary and adjacent asset classes where you can generate yield premium. For example, we’re spending a lot of time in the industrial services and facilities sector as well as the industrial outdoor storage sector, where you can generate some pretty attractive yield premiums relative to traditional industrial but where you’re playing off the same fundamentals as the industrial space.

You mentioned all of the hottest asset classes: industrial, multifamily, life sciences. Everyone is clamoring over these asset classes today. What’s Cerberus’ competitive edge when it comes to lending on them? 

I think competition has always been a pretty constant and consistent characteristic of our industry, but I think our secret sauce, if you will, is definitely the flexibility of our capital. There’s a lot that we’re able to do with it, in terms of where we play in the capital stack and being able to focus on where we think we can generate the best risk-adjusted returns. 

The sophisticated underwriting and structuring capabilities that our team brings to the table is also a huge advantage for us, and we really try to prioritize the client experience for our borrowers. For us, that doesn’t just mean going through the deal process and the closing process, but post-closing as well, ensuring that we bring best-in-class asset management to the table and that we demonstrate flexibility and sophistication. We want to provide a borrower experience where borrowers want to come back and do repeat business with us. 

Being part of the broader Cerberus engine is certainly a huge part of our strategy, as well as our competitive edge, because we are extremely fluid and connected with the broader real estate business here, and that’s from every phase of the investment process. So, when we can come to the table and demonstrate quickly to a borrower in a competitive bidding process that we have industry expertise and experience in a certain asset class or in a certain geography because of the broader portfolio, it gives us the added advantage of speed but also a level of credibility with the borrower that I think really distinguishes us.

What was the biggest challenge for you during the pandemic in terms of getting a new lending platform off the ground? 

Honestly, it was probably working in a remote work environment. That was very unprecedented. I started at Cerberus — as did pretty much all of my colleagues on our  debt platform — from home, and worked from home for the first year, year and a half. Our business is very high touch, and it’s heavily relationship driven, so we had to adjust to not having the in-person connectivity with one another, with sponsors, with brokers, with investors and especially with our fellow Cerberus colleagues. I think we were all very pleasantly surprised by how quickly the firm — and the entire industry, frankly — mobilized around this remote work environment.

But I would say over-communication was really key. And, as far as hiring during COVID goes, I really believe that the type of person who’s excited about a startup opportunity is the same type of person who demonstrates flexibility and resiliency in an unprecedented work environment.

How big is your team today? 

We’re 14 today, and growing. We have a team of very motivated, entrepreneurial, hard-working, great individuals who really saw coming on board and joining a new platform, in such an unprecedented market environment, as a real opportunity for themselves as individuals, in addition to really being part of putting their fingerprints on the ultimate blueprint of this business.

Why was a focus on DEI a priority for you in starting this platform?

A key priority when I took this seat was the ability to use my leadership to really advance the DEI objectives in our industry. I think for many business leaders, diversity tends to fall a little bit low on the early priority list when you’re getting a business up and running. 

But, for me, you know, my focus was to make it really part of our DNA from the beginning. I didn’t want a team that sat around the table and yessed each other because we shared the same perspectives or experiences or backgrounds. I made a very active decision to build out a team that was truly diverse in every nature of the word so that we could really challenge each other’s thoughts and perspectives. If you look at our team today, we’re 35 percent racially diverse, and a third of our team is women.

In your opinion, how is the industry doing from a DEI perspective, broadly speaking? 

As far as the industry goes, we’ve certainly made a lot of progress, and we definitely have real momentum. Those are both great things. It’s very gratifying to see the number of women and diversity candidates that are being elevated into senior positions today. It’s a big change from when I look back to my first 16 years in the industry, and I think it’s so important that we keep this momentum going, and we keep the focus on helping to change the composition of our industry, so that it starts to look a lot more representative of the makeup of our society. We still have a long way to go, but I think we certainly have the momentum, and we have the focus on it that we need.

You’re a mother of two young boys, ages 7 and 9. What are your hopes for them as it relates to gender and diversity as they grow up?

I think the greatest thing that we can do is change the perception in the minds of young people that anyone can really be anything. I think that we need to certainly empower young women to know that anything is within reach, but we also need boys to see women as capable of doing anything, and we really need to erase gender roles.

A year ago, my younger son did his “all about mom” survey at the end of preschool, which I think most parents are familiar with: They ask the kids to fill in a bunch of different questions about their parents, and I swear they do it to mortify us as parents, because the kids have a tendency to provide some rather revealing answers [laughs]. He had to pick one word to describe me as his mom and he wrote, “boss.” So, I’m hoping to be a role model to both boys and girls, because, frankly, we have work to do on both sides if we want to see more gender equality at the senior level.

We hear a lot about the recent war for talent. How are you attracting new hires today? 

It is certainly a challenging environment when it comes to hiring, but — going back to what I said earlier — the fact we’re building an early-stage business within a world-class institution like Cerberus is a huge distinguishing factor that has really helped us attract great talent to the business. There are many people who are looking to make that transition to something a bit more entrepreneurial — much like I was looking to do — and be part of building something. I think it’s a pretty unique opportunity in terms of what’s out there today. 

And, again, to our earlier discussion, people want to be part of diverse teams, and I think that that is undoubtedly a distinguishing characteristic that has helped us to attract top-tier talent.

With so much ongoing uncertainty in the world today, how are you underwriting deals? 

We are always focused on basis, and we come back to the key fundamentals of basis and location. Those are really at the core of how we think about mitigating risk when we’re underwriting and sourcing opportunities. We’re transitional lenders typically lending on heavy value-add business plans, and so we believe strongly in alignment of interests with our borrowers in all of our deals. We think that having meaningful subordinate equity is very important in all of the deals that we do, and then we focus heavily on fundamentals. If COVID taught us anything, it’s that market fundamentals can shift and disruption is possible, and so you have to be able to withstand downward pressure. 

So, being sure that our underwriting reflects realistic market fundamentals and growth projections is really important, as well as stress cases, which is why I come back to basis being such an important factor in how we underwrite deals today.

You live in Manhattan. Are you a New Yorker? 

I’m originally from Gainesville, Fla., but New York has been my home for about 20 years now.

What first drew you to the real estate industry? 

For me, it was about the analytics and mathematics of the investing side of the business. That was really the bread and butter of my academic interest in it, if you will. I started as an investment banker in real estate, and went into the real estate group, specifically because of the strong alumni community from my university that worked within the team that I joined. I think working with a great team where you have mentorship and support and where you’re going to work on deals that are interesting is really important. 

Over time, I found that real estate brings such an interesting intersection between the analytical side of the business and then the high touch side of the business. We as individuals consume real estate in part of our day-to-day lives and I think the opportunities that continue to grow and evolve are fascinating. It’s an industry that has stayed dynamic and kept me focused and challenged for 20 years now.

What’s your favorite part of the job today? 

Honestly, I love the unknown of every day. The role certainly is dynamic, and I wear many different hats — some of which I’m putting on for the first time on certain days because you can never predict the unexpected, to a certain extent. But, honestly, the people side of it is certainly the most rewarding part. I’ve loved building up this business, hiring all of the individuals that work on this team, and getting to know and working with and collaborating with my colleagues at Cerberus. It’s a place filled with very talented individuals where everyone is rowing in the same direction, and that’s probably the most exciting part about waking up and coming to work every day.

What keeps you up at night? 

I have a pretty overactive mind, and my mind is certainly moving at 1,000 miles an hour, somewhere between the hours of 2 a.m. and 4 a.m. on most nights [laughs]. But, top of mind right now is the conflict in Ukraine, which I think is also top of mind for everyone right now. It’s devastating on so many levels and is certainly one of the things that keeps me up right now.

What’s next for Cerberus Real Estate Credit?

Senior leadership is focused on growing and scaling this business in a really meaningful way. So we’re continuing to stay active and we are always looking for relative value opportunities. So, even when we saw significant disruption in the marketplace a few weeks ago, we really tried to lean in to the opportunity, and we’re excited to be moving forward. We see a bright future ahead.

Cathy Cunningham can be reached at ccunningham@commercialobserver.com.