The Real Deal New York

Eastdil, Meridian top list of large-loan brokerages

Eastdil brokered 20 debt deals totaling just under $8 billion

March 14, 2014 03:15PM
By Adam Pincus

Michaels-1095-Herzka-Verrone2-Ziff

From left: Howard Michaels, 1095 Sixth Avenue, Ralph Herzka, Robert Verrone and Simon Ziff

The investment-banking giant Eastdil Secured and the financial brokerage firm Meridian Capital Group were the two most active intermediaries in the origination of loans of $100 million or more in New York City last year, an exclusive analysis by The Real Deal found.

Eastdil brokered 20 such debt deals with a total value of just under $8 billion, while Meridian brokered 26 of those large loans for a total of $5.5 billion in the five boroughs.

The two were followed by the Carlton Group, with six deals totaling just under $2 billion, Ackman-Ziff Real Estate with seven deals adding up to $1.3 billion, and Iron Hound Management with two deals for just over $1 billion.

Rounding out the firms: HFF with six deals valued at $784 million, Cushman & Wakefield with three deals for $688 million and Singer & Bassuk with three deals totaling $610 million.

 

TRD examined data from real estate tracking firms Actovia and PropertyShark and spoke with sources to compile a list of more than 140 loans originated in 2013 with debt of $100 million and more. Through industry sources, TRD matched up more than half of those loans or loan packages with the brokerage firms.

The firms surveyed all declined (with one exception) to provide TRD with a complete list of their deals, citing confidentiality agreements.

In addition to the firms in the ranking, TRD asked CBRE Group, Newmark Grubb Knight Frank, Jones Lang LaSalle and other active national and local brokerage firms if they had originated deals of $100 million or more in New York City last year. But the firms declined or did not provide any, and TRD did not find any through its own sources.

The number of firms acting as intermediaries for these mega-deals was small, with just eight. That number was similar, however, to the nine investment sales firms that brokered property transactions last year in New York City greater than $100 million. There was also overlap between the two rankings. Eastdil, HFF, Carlton Group and Cushman & Wakefield brokered $100 million-plus investment sales deals last year, as well.

TRD found that deals of $100 million or more totaled about $40 billion, with about half that handled by brokers. Over the past six years, the average total amount of loans of all sizes in the city has been closer to $65 billion, according to figures from commercial firm Massey Knakal Realty Services.

Unlike property brokerage that is very closely tracked and larger deals are regularly publicly reported in articles or through databases like Real Capital Analytics and CoStar Group, loan brokerage remains largely unreported.

It was not clear why mortgage brokers publicize their deals less frequently than sales brokers. Insiders proposed several theories.

Ben Thypin, director of market analysis at Real Capital Analytics, said it may be caused by the fundamentally different relationship between a seller, a sales broker and a buyer, and between a borrower, a mortgage broker and a lender.

In a sales transaction there is typically a limited pool of potential buyers, but in a mortgage transaction, there are generally many potential lenders. In addition, a mortgage brokerage might do dozens of deals in a single year with a lender for one reason or another, and it is not beneficial for either the broker or the lender to publicize that relationship; therefore leaving it open to competition from others, Thypin said.

Eastdil, whose website says it has 23 people in its New York office covering a range of investment banking fields, has also been the leader for the past three years in brokering property. Eastdil brokered the largest loan in the city last year, for $1 billion on Blackstone’s 1095 Sixth Avenue, at 42nd Street.

Meridian, founded in 1991 by company CEO Ralph Herzka, was unusual in the list of firms because its approximately 90 originators working on New York City deals broker very small loans — as well as some of the largest deals in the city. One example is the $525 million loan placed on RXR Realty’s 2.3 million-square-foot Starrett-Lehigh Building at 601 West 26th Street in Chelsea.

Even as the firm now handles a wide price range of loans, it started with smaller mortgages when the company was founded 23 years ago. However it has grown into larger deals over time, Ronnie Levine, a managing director at the firm, said. And is refining that strategy.

“In the last five years, we have made a concerted effort to focus on the more institutional end of the market,” including hiring consultants, accountants and attorneys to service those clients, Levine said.

“But ultimately the engine of Meridian has been the smaller loan market which keeps the lights on when the market contracts,” Levine said.

Commenting on the TRD analysis that found that only about half the large deals were brokered, Levine said his firm was, “very proactive about getting in front of the larger owners, operators and investors and pitching our service.”

The largest deal that Carlton, headed by Chairman Howard Michaels, advised on last year was a $625 million debt package for the purchase and rehabilitation of a four-building portfolio acquired by HFZ Capital Group. Eastdil also worked on that deal, arranging the sale and the financing.

One of the largest deals arranged by Ackman-Ziff, led by Simon Ziff, was a $275 million loan for the leasehold financing of the Milford Hotel, at 700 Eighth Avenue between 44th and 45th streets. One of HFF’s big deals was a $110 million loan on LCOR’s 25 Broad Street, while a large deal for Singer & Bassuk was a $300 million loan on Rose Associates’ 70 Pine Street in Lower Manhattan. And finally the largest public deal arranged by Cushman & Wakefield was a $288 million construction loan at Time Equities’ 50 West Street in Lower Manhattan.

Some mortgage professionals privately complain about what they say are structural advantages Eastdil and Meridian have in the market. For example, critics say Eastdil uses its leverage as the city’s dominant investment sales brokerage to secure mortgage brokerage transaction. But others called such complaints sour grapes.

One new entry in the industry has already made a mark. Iron Hound, which began as a shop focused on workouts, advised on the second largest loan package in New York City last year:  the $925 million of debt arranged by SL Green Realty for the Chetrit Group’s acquisition and repositioning of 550 Madison Avenue.

“Last year was our first year doing mortgage brokerage,” Robert Verrone, principal with the firm, said. “We did the second largest loan in New York City and we did a bunch of other stuff in New York. We like this business.”

Correction: An earlier version of this story did not include a Cushman & Wakefield deal that TRD had been aware of. The deal has been added to reflect the complete total.

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