The Big Chair: CBRE’s James Millon Breaks Down Debt and Structured Finance in 2024

Few know commercial real estate capital markets as intimately as CBRE (CBRE)’s James Millon — and even fewer have their hands on the pulse of some of the largest players and deals across the institutional capital investment space. 

For nearly a decade, along with CBRE Vice Chairman Tom Traynor, Millon co-headed the firm’s nine-person Global Institutional Debt Advisory Group, a special operations team that closed more than $47 billion in complex real estate transactions between 2016 and 2023. Prior to arriving at CBRE in 2016, Millon spent 10 years in investment banking originating large loans, much of it at Deutsche Bank (DB). 

Last fall, Millon was tapped to lead CBRE’s U.S. debt and structured finance operations, a C-suite role that reaches beyond the intensity of large loan brokerage and advisory into the pressures of asset management, debt origination and the firm’s $400 billion global servicing book. 

Millon sat down with CO to discuss his first year in the big chair and how he’s developed his skills as an advisor and CRE capital markets investment expert. 

This interview has been edited for length and clarity 

Commercial Observer: It’s been a year since you were appointed president of U.S. Debt and Structured Finance at CBRE. What’s it been like in a leadership position like this, over the entire firm, compared to running your own team?

James Millon: It’s been an incredibly rewarding 12 months here at CBRE running our Debt and Structured Finance practice nationally. A couple key takeaways, for me, is how incredibly dynamic this organization is, not just CBRE as a whole, but particularly our Debt and Structured Finance practice. You think about the areas covered in that vertical: it’s our advisory business, it’s our brokerage business, it’s Fannie Mae and Freddie Mac business, and it’s all of our in-house infrastructure related to asset management and closings. It’s our $400 billion global servicing book. Our volumes, in terms of debt origination, this year will approach $50 billion. And there are so many capable people behind the scenes that make this happen. Where I’ve been different running the business is that I have very much a “player-coach” mentality. I haven’t pulled myself entirely off the field, so for a lot of our larger clients in market-defining transactions, I still stay very involved in those situations, especially when it comes to problem solving and capital markets solutions. 

What have you learned about yourself that you didn’t know before you took this role? 

[Laughs] That I have much better bandwidth than I thought I had. Even though we’re all sitting on capital markets, which change literally by the day, and in some cases by the minute, you still need to have a balance of medium- and long-term strategic planning, in the same way you need to be tactical and react to what is basically a cyclical business. You need to take advantage of opportunities as they present themselves.

Has your view of the market changed from this position compared to where you were before as an institutional debt specialist?

Without question. You think about the type of volume coming through the system, between our Debt and Structured Finance and our investment sales practice, we’re pricing anywhere from $300 million to $600 million of transaction activity every single day. Think about that. That’s a ton of information coming through the system, in real time, that only we at CBRE have, relative to the competition. So that gives us incredible visibility into current market dynamics, into the trends, into how investors are thinking about the world. 

So, for me, having that visibility into the entirety of the capital markets system, it makes me think like a better investor, and it also allows me to spend time if there is a certain area that a client wants to focus on, in terms of deployment of capital. I can get extremely granular and extremely deep in that particular dimension, whether that’s an asset-class dimension, or a geography dimension, or execution dimension of either debt and equity. We just have an incredible amount of data. Now that I see all of it, it just makes me so much more informed on capital markets. And I wouldn’t say before that I certainly didn’t see all of it — I’d touch different aspects of it — but now it’s available full time.

Is it difficult to jump between credit and equity so quickly each day? How do they differ in your eyes?

As we think about equity capital markets, those strategies are generally the Capital Asset Pricing Model — it’s core, core-plus, value-add, opportunistic. Maybe there’s development or distress in there as well; that’s the equity. And then on the credit spectrum, based on senior ranking poisons, you have first mortgages, you have mezzanine, you have preferred equity, and sitting here at CBRE we’re right in the middle of it. We’re trying to find the most sufficient capital on both sides. You’d only have that opportunity sitting in the seat I have right now.  

You spent your career specializing in large loans. How did you go about structuring those transactions, and what’s it like moving into equity structurings today in this new role?

My career for the most part has been on the principal lending side of the business, and on the advisory side, trafficking in what we call large loans. That really just means you’re dealing with institutional clients with complex issues who are trading at a quantum that’s north of $100 million on average, and often larger than $1 billion. But my foundational background is in credit, where I truly understood relative value between different levels of risk and how to price, structure and syndicate around it, and you just expand that to the equity framework, which isn’t entirely different from a capital markets perspective. Where it’s different is there’s an operating component, and that’s where you start to marry equity capital markets with the fundamentals. Those fundamentals are very specific and bespoke to whatever the asset class, business plan or individual strategy is. That’s the difference between credit and equity capital markets. 

When most people think of equity capital markets, however, they often think of large pension systems, or foreign capital, or LPs who don’t have much governance in a JV agreement. But equity is capital coming into a strategy, or fund, looking for return at a certain level of risk, no different from what a credit investor might expect. But it gets more complicated when you add in the operating component, where you have the general partner, the developer. It’s a different business plan, and the economics associated with it are different. So that’s what’s been nice, marrying those two pieces together, the fundamental aspects. 

What makes those particular deals so complex, and what makes a good large loan specialist? 

It starts with the foundation, the fundamental granular analysis of the actual real estate itself. That’s what we all grew up on in the business, underwriting. That underwriting is consistent whether you’re on the debt or the equity side. Being able to truly underwrite a piece of real estate, and go through it, you learn every piece is different. Underwriting a hotel is different than a Class A office building, and that’s different than underwriting an open-air retail center. They all have different qualities that create opportunity and define what they are and why they exist within a certain market. That takes years and years to truly develop. Once you have true appreciation of an asset — and that the asset’s sole purpose from an investment perspective is to generate a future cash flow that an investor can discount back to generate an appropriate yield — then you start marrying that with what’s happening in capital markets. That’s the dimension that’s really interesting, and it also takes many years to figure out. 

What do you love about commercial real estate?

The thing about real estate is there’s so many different job opportunities that can be tied to one underlying piece of real estate. That one asset can have bankers, brokers, investment sales professionals, lawyers, architects or even traders at a desk trading derivatives tied to a loan backed by that retail center or that multifamily property, creating structures that package these loans up as commercial mortgage-backed securities, collateralized loan obligations, or Fannie and Freddie deals. So it’s incredibly dynamic. But — and I can’t stress this enough — it really starts with understanding the underwriting for a particular project. 

What did you take from your investment banking experience and apply it to the brokerage world?

At Deutsche Bank, certainly the types of clients we had — the Blackstones, the KKRs, the Starwoods, the J.P. Morgan Asset Managements — are among the biggest clients out there transacting across different fund strategies, and they bring very complicated situations. They’re not just complicated because they’re big, but it’s because they’re often doing something new that’s cutting edge and exciting, and as a banker you need to come up with a financing solution that’s tailored to their specific strategy to get them to where they want to be. At the end of the day, you’re partners with these clients. You might be playing at a different portion of the capital stack, but in certain situations, you’re contributing 70 cents on the dollar to an enterprise value that’s a dollar. So, I just truly learned to appreciate the partnership dynamic of it. 

The other part that’s important is this: It’s not a trade, it’s a relationship. Just because you work around the clock for 90 days on a complicated closing, and you get it closed, it doesn’t stop. The relationship and the asset management continues. You have to solve problems through the continuum of the life of the loan, until you get paid back. CMBS is obviously different because you’re originating and selling it off, but in most cases you have to know the capital markets and the arbitrage between buying and selling and making a loan and pricing it. You’re living with these clients for the life of the loan. For us here at CBRE, maintaining those relationships through the life cycle of the loan, even as advisers, is incredibly important. 

What are the tricks to maintaining those relationships? How do you advise people to be successful at that?

I’d say a couple of key areas that not many people focus on, but are important for sustainable relationships, is to actually work with clients off transaction cycles. Work with them on strategies, or research papers, get them to a place where they can raise capital and make deployments that are away from just one situation or one transaction. That’s really important. 

Without question, when the markets are extremely liquid, there’s very little risk in the system, and everyone is transacting freely, [brokerage and advisory] just becomes a bit of a commoditized product. To differentiate yourself, in this seat now, you have to offer something more than just being an execution tool in any given marketplace. You need to think deeper, you need to think about problem solving, and be solution-oriented for them. While it’s difficult to operate in markets and environments when things are challenging, I love those markets. Those are the markets that truly differentiate people who can think through complex problems and those who can’t. Maybe they’re not the most lucrative years, but you’re building relationships because you’re in the foxhole with these clients working through their problems in real time, and they’ll never forget that. 

What’s the best piece of business advice you’ve ever received?

Be passionate about what you do. It can be a challenging market and difficult circumstances you’re handed, but if you’re passionate about what you do, and bring it every day, it carries over into a cyclical business, where you’ll have years when things are strong and promising and others when it’s not. It’s difficult to think about what tomorrow will bring, but if you’re passionate about what you do, it helps you fight through those situations.

Brian Pascus can be reached at bpascus@commercialobserver.com