New Clients Enter The Picture During Year of Dislocation for Commercial Real Estate
How a year of high interest rates and high inflation brought unforeseen opportunities for the hungry few
By Brian Pascus April 23, 2024 9:00 am
reprints
When 2023 began with three of the four largest commercial bank failures in U.S. history, it made sense for both lenders and brokers to pivot their business models and further diversify their client bases while they could.
In fact, Walker & Dunlop touted a client roster that included roughly 45 percent new clients as a direct result of the market dislocation.
The addition of new clients was done not so much out of need, but due to a Darwinian hunger to attract new, shiny clients now that so many lenders either fell out of the picture or were unwilling to extend liquidity until the market settled down.
Christopher Peck, senior managing director and capital markets head of JLL (JLL)’s New York office, emphasized that his team built out several lines of business to take advantage of different market opportunities. To this end, while the firm’s investment sales business might have been down in 2023, its consistent note sale business allowed the group to land Blackstone (BX) as a client on the loan book sale of the failed Signature Bank.
“By building out emphasis and expertise in every category, we can adapt to what the market gives us,” said Peck. “Whether bull market, bear market, or housing is the opportunity or office is, we have the right ingredients already in place to capture those market opportunities. … We built the business to be resilient in that respect.”
He said this resilient financing model has allowed the group to access deals and weather a truly generational capital markets storm that it likely couldn’t have withstood as recently as five years ago.
“We’re not the most aggressive marketers, we don’t spend a lot of capital on marketing, or time running around entertaining people, but we stand behind our ability to execute and navigate people through the shoals of a messy capital markets environment,” said Peck.
Diversification among business lines is a strategy Berkadia used in 2023 to grow its affordable housing platform, according to Hilary Provinse, executive vice president for production capital markets at Berkadia. She said that David Leopold, senior vice president and head of Berkadia Affordable Housing, constructed a three-pronged business model to reach clients in investment sales, mortgage banking and tax-credit syndication.
“If you look at each of those three business lines, those are all things our affordable clients need, and each of those groups collaborates together to bring products and services to our clients, and that resulted in a No. 1 market share on the affordable side,” said Provinse. “Our growth and investment in affordable, the collaboration of three business lines together, serves our clients, and we end up doing more GSE [government-sponsored enterprise] business as a result.”
Even Clarion Partners, a global asset manager of real estate, moved outside its comfort zone in 2023 due to the fluctuating capital markets temperatures. The firm said that it has “historically played in the subordinate debt space,” but last year expanded into select senior construction loans given the illiquidity of the commercial banking sector — a pivot that allowed for new clients and new deal flow.
“We’re typically focused more on mezzanine and preferred equity — so subordinate debt — but market conditions being what they were, we were able to do a few senior mortgages, mostly on ground-up construction,” said Drew Fung, managing director at Clarion.
