Berkadia’s 15-Year Evolution of Excellence: Q&A with Justin Wheeler, CEO of Berkadia

In the ever-evolving landscape of commercial real estate, Berkadia has carved out a remarkable journey of transformation and growth since its inception in 2009. Born during a tumultuous economic period, the firm has emerged as a powerhouse in multifamily lending and investment sales, now celebrating its 15th anniversary. Berkadia’s evolution reflects not just growth in numbers, but a strategic expansion into multiple specialized sectors.

To understand the strategic vision behind this remarkable evolution, we sat down with Justin Wheeler, the company’s CEO, for an in-depth exploration of Berkadia’s past, present, and future. In this candid conversation, Wheeler provides insights into the firm’s remarkable growth, navigating market complexities, and the strategic decisions that have positioned Berkadia as a leader in commercial real estate services.

Q: Berkadia is celebrating its 15th anniversary. How has the firm evolved since its inception in 2009?

Justin: Intentionally and consistently evolving has been the critical thread woven into Berkadia’s history. We started from modest beginnings, born out of bankruptcy as a joint venture between Berkshire Hathaway and Leucadia National Corporation (now Jefferies Financial Group), with an uncertain future but deeply committed. We’ve transformed into the #1 multifamily lender by volume in the country, according to the Mortgage Bankers Association, and the #7 multifamily investment sales platform by volume (and #5 multifamily investment sales platform by deal volume), according to RCA, all thanks to the hard work of our team. Our servicing portfolio has more than doubled to $415 Billion in UPB, and we’ve expanded into multiple specialized sectors, including Affordable Housing, Hotels & Hospitality, Medical & Life Sciences, Manufactured Housing, Seniors Housing & Healthcare, Student Housing, and Single-Family Rental & Build-to-Rent. And our growth story is not over – I’m excited to see what the future holds.

Q: What are the major capital markets trends impacting CRE?

Justin: Treasury rate volatility has been the defining feature for capital markets this year. We’ve seen dramatic swings throughout the year, with the 10-Year Treasury starting in the 3.80% range, peaking at 4.70% in April, then dropping to 3.65% in September before climbing back to the 4.25% range. Nearly 70% of trading days in 2024 experienced 5 to 10 basis-point intraday movements, significantly impacting transaction activity and the bid-ask spread.

Interest rate sensitivity always plays a role in commercial real estate (CRE) transactions, but it is particularly significant for buyers who acquire CRE properties for cash flow and ongoing returns. While we’ve seen lenders offer various strategies to alleviate this burden – such as rate buydowns, more short-term fixed rate options or prepayment flexibility – many investors have had a hard time projecting the cost of capital given the unprecedented volatility of interest rates.

Q: What trends are you seeing in investment sales activity?

Justin: The market has shown a clear flight to quality, with investors favoring newer assets built after 2017. Transaction volumes are being driven by both private and institutional investors, including fund shops, syndicators, and foreign pension funds, who are strategically acquiring high-quality assets at attractive valuations. 

Sellers are motivated by various factors, including liquidity needs, loan maturities, fund life cycles, and the desire to optimize their portfolios. Despite overall market challenges, these investors see significant opportunity in newer properties that offer stable cash flows, modern amenities, and energy-efficient designs. The current market presents a landscape where buyers with substantial capital and access to competitive financing can capitalize on less competitive market conditions. Multifamily properties remain an attractive investment, particularly for their resilience and consistent income streams in a volatile economic environment.

Q: What’s your outlook for 2025, particularly regarding interest rates and lending activity?

Justin: The interest rate landscape for 2025 is nuanced, with short-term rates expected to decline, albeit more gradually than initially anticipated. While the Federal Reserve is likely to continue cutting rates, the longer-term trajectory remains uncertain and heavily dependent on unpredictable economic and policy shifts. The market anticipates potential stabilization, with rate volatility expected to moderate as policies become clearer. This gradual stabilization could create a more favorable environment for commercial real estate, offering some relief from recent market uncertainties. Key considerations include potential changes in government spending, tax policies, and overall economic growth dynamics. Ultimately, the outlook suggests a flexible approach, taking advantage of opportunities that present themselves as the market lurches toward the cycle change.

Q: What guidance would you offer to borrowers seeking capital in 2025?

Justin: Leverage the strengths of Fannie Mae and Freddie Mac’s (GSEs) programs, particularly their efficient rate lock capabilities. Given the ongoing treasury market volatility, the ability to quickly lock in rates through the GSEs’ programs provides a significant advantage. This strategy allows borrowers to capitalize on favorable rate movements and manage risk effectively in an uncertain environment.

Q: How has Berkadia’s market presence grown in recent years?

Justin: Relentless focus on profitable market share and on continuing our reputation as a capital markets powerhouse. In 2022 and 2023, we achieved $88 billion in combined production volume across investment sales, mortgage banking, and equity. 

The firm’s lending prowess has been particularly noteworthy. With $56 billion in total loan originations, including $31 billion in agency production across more than 2,800 loans, Berkadia has demonstrated its deep expertise in navigating volatility and providing unique value to our clients. Our servicing portfolio now exceeds $415 billion UPB. These are the outward signs of our commitment to being the best at our craft in serving our clients and growing our reputation as a market leader in commercial real estate services.