Pregame analysis: Players weigh in on Meridian Capital’s investment sales push

Brokerage's move likely to impact middleweight firms

TRD New York /
Apr.April 24, 2015 06:00 PM

Eat. Sleep. Close. Repeat.

Meridian Capital Group’s mantra, apt for what sources say is one of the most intense companies a broker can work in, has served it well in the mortgage business. But could Meridian bring the same pizzazz to the investment sales space?

Meridian Investment Sales will specialize in brokering property deals in the multifamily, office and retail markets. The division will operate out of a new office, slated to open by May in an undisclosed Midtown location.

While details on the Meridian’s business model for the new division are largely unknown, the announcement immediately called to mind the platform of investment-banking giant Eastdil Secured, which is Meridian’s most direct competitor in brokering loans. Eastdil was the top New York City large-loan brokerage in 2013, with $7.98 billion in deals that exceeded $100 million in debt, according to a ranking by The Real Deal last March. Meridian came in at No. 2 in that ranking, with $5.47 billion in deals. Unlike Eastdil however, Meridian’s bread and butter has been mid- and lower-market mortgage deals — the firm says it brokered a whopping $30 billion of loan deals in 2014.

Meridian opted to the give the new office’s chief leadership role to Yoni Goodman, an executive with a background in investment banking rather than sales. Goodman, senior managing director, joined Meridian from Goldman Sachs late last year.

Key players in the New York City investment sales space said the arrival of Meridian is unlikely to affect heavyweights such as Eastdil and CBRE Group, but could have a big impact on the more mid-market-focused brokerages. In 2014, Eastdil saw $11.2 billion in dollar volume of brokered sales, while CBRE saw $5.4 billion, according to a TRD ranking in February.

Stephen Shapiro, executive vice president in JLL’s Capital Markets Group, pointed to Eastern Consolidated, Cushman & Wakefield, Marcus & Millichap, Aaron Jungreis’ Rosewood Realty Group and Steven Vegh’s Westwood Realty Associates as firms likely to face Meridian head on.

“The second tier of top investment sales firms is where some of the competition will really rear its head,” Shapiro said.

In response, Meridian’s Goodman said: “When people ask whether we are setting up our investment sales division to emulate one specific firm or another, what resonates most is when we explain that we are setting it up to be distinctly Meridian-like in its approach.  Meridian today has clients ranging from individuals and families to the largest private equity funds and institutions in the market and as it takes form over time, this new division will look to serve the needs of all of our clients, whether the property at hand is a small walk-up apartment building, a luxury retail condominium or large office building.   When it comes to our people, process and overall business orientation, we are looking to be very institutional in our approach.”

To get its new division up and running, the firm poached three brokers from Eastern Consolidated. Principals David Schechtman and Lipa Lieberman were among the listing brokers on 17 sales in 2014 totaling $418 million — nearly a third of Eastern Consolidated’s $1.5 billion in self-reported closed sales. A representative for Eastern Consolidated declined to comment for this story.

Some investment sales brokers expressed concerns that Meridian could become the latest firm at which mortgage brokers refer their clients to sales brokers in-house. Critics have called this practice a conflict of interest given Meridian’s area of expertise, while others said it’s a relatively standard practice. The primary focus of Eastdil Secured’s parent company, Wells Fargo, for example, is lending.

Bob Knakal, chair of New York investment sales at Cushman & Wakefield, said it was a logical move in the vein of Massey Knakal Realty Services, now part of Cushman, launching a lending arm, known as Massey Knakal Capital Services.

J.D. Parker, first vice president at Marcus & Millichap, echoed Knakal’s reaction, saying, “The prevailing thought is we’re able to offer our client more options, rather than just sell or just get financing. It’s hard to give sound advice if you’re limited.”

Parker said he was wasn’t concerned about Meridian’s push into his space.

“The best firms aren’t looking over their shoulder,” he said. “They’re trying to improve their platform.”

Jungreis said, “I wish them all the success. Anywhere David Schechtman goes, he’ll make it a success.”

And while the investment space may be crowded, there is room for Meridian to make a splash, insiders said. Meridian will likely fare well in unproven markets with less liquidity and fewer lenders, according to Shapiro.

“In just Manhattan alone, there was about $40 billion in sales in 2014 of buildings over $10 million,” Shapiro said. “If you capture just 10 percent of that market, you could make $4 billion in deals.”

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