On his way to the top job at Freddie Mac, David Brickman transformed the multifamily division of the $2.5 trillion mortgage giant, turning it from something that resembled a sleepy life insurance company into a sophisticated finance operation.
Now, as the head of the new joint venture backed by mortgage brokerage Meridian Capital Group and investment manager Barings, he’s focused on taking a middling agency lender and making it one of the top platforms.
Brickman’s hire and Meridian’s involvement promise a shakeup in a playing field that represents about a fifth of the $390 billion in multifamily mortgages originated last year.
“It’s a competitive business but there are ways to grow it,” said Matt Slepin, founder of the real estate executive search firm Terra Search Partners and a longtime associate of Brickman’s. “The Top 10 group [of Freddie’s lenders] doesn’t change overnight, but he can rebuild and get market share.”
Brickman announced in November that he would step down as Freddie Mac’s CEO after more than 21 years at the quasi-government agency.
“To some extent the platform has been underutilized.”
Multifamily mortgage players keenly awaited his next move. On Wednesday, Brickman announced he’s going to spearhead a joint venture backed by Meridian and Barings.
The JV doesn’t yet have a name, but does have its work cut out. Freddie’s list of top lenders is dominated by giants like CBRE, Berkadia and JLL – and the pecking order rarely changes. Barings didn’t even make the list of the Top 10 lenders last year, which was led by CBRE with $13.2 billion.
And they’ll all be grabbing for a piece of a smaller pie. In November, the Federal Housing Finance Agency set Freddie’s loan purchasing cap for this year at $70 billion, down from $100 billion in 2020.
In an interview with The Real Deal, Brickman said he hopes to leverage both Meridian’s network as a brokerage and Barings’ lending arm.
“To some extent, the platform has been underutilized,” he said. “It could be grown into a significant player in agency and multifamily space and possibly help transform the market.”
Banking on pedigree
The new partnership started coming together before Brickman announced his resignation.
Barings, the investment management firm owned by Massachusetts Mutual Life Insurance Company, was looking for a way to boost its Freddie business.
The company holds one of a select few licenses that allow lenders to originate loans for Freddie Mac. It was looking to either sell the license or form a strategic partnership that would help it grow, according to Yoni Goodman, president of Meridian Capital.
The two companies started working on a joint venture in the fall and Meridian approached Brickman about joining after his November announcement.
“David Brickman clearly has among the best resumes in the business,” Goodman said.
It’s certainly a formidable CV, garnished with degrees from the University of Pennsylvania, Harvard University and the Massachusetts Institute of Technology. When Brickman started out in the multifamily division in the early 2000s, Freddie lagged behind its sister agency Fannie Mae in the loan buying business.
But Brickman introduced several innovations to the agency, including a Wall Street-style program of securitizing mortgages. In 2015, Freddie surpassed Fannie for the first time with $47.3 billion in multifamily loan purchases – a year-over-year leap of 67 percent.
“He took a model that had been a competitive weakness and drag on the business and turned it into their advantage,” said Slepin.
In 2019, Brickman took over as CEO of Freddie Mac with his sights set on shepherding the company out of a decade-plus era of federal government conservatorship, a prospect that had gained momentum under President Donald Trump’s administration. But the dream of privatization lost steam in the administration’s final days, and seems less likely in Joe Biden’s White House.
Now in the private sector, Brickman is gearing up to make a run through the field of Fannie’s top lenders – a move that could ruffle some feathers along the way.
As a brokerage, Meridian generated a lot of deals for Freddie lenders like the Warren Buffett-backed Berkadia, Ivan Kaufman’s Arbor Realty Trust and Greystone. Founded by Borough Park native and Ladder Capital co-founder Ralph Herzka in 1991, Meridian has a reputation for being aggressive – the company’s mantra is “Eat. Sleep. Close. Repeat.” The firm took the top spot in TRD‘s 2018 ranking of top commercial loan brokerages.
Some industry insiders believed the new venture is well poised to grab market share. And with one foot in lending and the other in brokerage, they pointed to a potential conflict of interest where Meridian could steer its borrowing clients away from other lenders and toward its new platform.
Brickman insisted the new joint venture – while financed in part by Meridian – will be independent from the brokerage with its own office, director and staff. And Goodman said the brokerage will still serve its borrowing clients as an unbiased advisor.
“Meridian did close about $10 billion in agency mortgages with about half a dozen lenders, and we expect that will continue,” he said.
Still, it’s undeniable that the new partnership creates a formidable competitor. Freddie Mac’s speciality is in buying loans for older, smaller multifamily buildings – a market that Meridian dominates on the brokerage side.
Eastern Union president Ira Zlotowitz said the new joint venture will alter relationships in the brokerage community, with few wholly independent brokerages left.
“They [Meridian] were one of the last holdouts,” he said.