High interest rates, low lending volume, and overall market uncertainty? Don’t tell Marcus & Millichap Capital Corporation (MMCC), which has continued to grow its capital markets platforms and close major deals since we spoke with their team last November.
MMCC, and its institutional division IPA Capital Markets, have not only continued to add experienced originators to their highly-collaborative teams, but have also innovated new solutions for clients, providing capital solutions in a challenging market. TRD sat down with some of the newest recruits to learn how the firm’s unique strengths have helped them provide clients with capital markets services and commercial real estate financing solutions and other investment opportunities, and what recent rate cuts mean for their continued success.
Navigating A Tough Market
Notwithstanding the Federal Reserve’s recent move to reduce the federal funds rate by 50 basis points, we’re still living in a tight market when it comes to sourcing capital. Max Herzog, Executive Managing Director at IPA Capital Markets, describes how market uncertainty has led to more expensive capital stacks and fewer overall transactions.
“A lot of equity groups have transitioned to sub-debt mezzanine, B-note pieces and preferred equity loans as opposed to straight equity,” he explains. “They can obtain similar returns to what they’ve traditionally received on the equity side in a less risky part of the capital stack. Despite recent rate cuts and the anticipation for more in the future, there is still uncertainty in the market.”
Some originators, including Frank Montalto, Managing Director at IPA Capital Markets, are beginning to see the market shift.
“Activity and volume over the past 60 days have picked up tremendously,” says Montalto. “I believe there’s a notion of freeing up a little bit of capital in this space, along with recent rate cuts, which is going to make it a lot easier to pencil deals.”
MMCC helps clients navigate the challenging post-pandemic market, providing tailored capital solutions for CRE financing as well as offering a broad range of other opportunities for investors. Thanks to their longstanding capital relationships, the originators are able to work with lenders to find creative solutions in the face of these headwinds. In the last twelve months, the firm’s capital markets teams have closed over a thousand transactions with 340 unique capital sources, producing $6.8 billion in funding for assets located in 44 states and Canada.
On the loan sales and trading side, MMCC’s subsidiary Mission Capital Advisors (MCA) works with lenders in their disposition of whole loans and REO, providing investors with a variety of opportunities to expand their portfolios during a time of generalized uncertainty. A leader in the loan sales and trading space for two decades, MCA has closed over $79.4 billion in loan and REO sales and $189 billion in mortgage services transactions since its inception in 2002.
“The executives at MCA have fluency and experience in trading complex portfolios,” says Evan Denner, Executive Vice President and Head of Business at MMCC. “Especially in this market cycle, as lenders try to fortress their balance sheets, it’s more critical than ever to have a team with deep market knowledge. Behind the MCA team are more than 1,700 sales agents in over 80 offices across the U.S. and Canada that have in-depth market knowledge and relationships. Having these boots on the ground has been invaluable providing the team with real time local market data derived from tens of thousands of sales transactions.”
A Growing Team Closes Marquee Deals
In spite of uncertainty and more expensive capital, MMCC and IPA Capital Markets have continued to grow the team of originators and close major deals. Recent additions to the team, including Herzog and his partner, Senior Managing Director, Marko Kazanjian, both came from JLL and have been instrumental in expanding the institutional capital markets business in New York since joining IPA Capital Markets in August of last year and recruiting four additional members to support the NY team.
“In addition to the tri-state NY market, we’ve closed deals in South Carolina, Miami, and Chicago,” notes Kazanjian.
Other recent hires across the platform include Brandon Roth from JLL, returning IPA Capital Markets originator Anita Paryani-Rice from Newmark and Harry Krieger from CBRE on the IPA Capital Markets side, as well as Jennifer Salas, Francisco Nacorda, Robert Cronenberg, Robert Caliguri, Richard Williamson, Casey Hansen and Mark Litwack on the MMCC side, and James Gosse on the MCA side.
“Over the past three years, we have had the privilege of welcoming numerous seasoned originators, significantly enhancing our already robust talent pool,” says Erika Banach, First Vice President, Corporate Strategy & Development at MMCC. “Our leadership is committed to offering exceptional support, with the primary objective of fostering business growth and equipping our teams with the necessary resources and tools to provide an unparalleled level of service to our clients.”
This strategy has paid major dividends, with recent hires closing a slew of notable deals this year.
For example, Herzog and Kazanjian’s team recently secured $37.25 million in financing for a major South Carolina multifamily development with Protective Life Insurance Company on behalf of NYC-based developer JEM Holdings. Dubbed The Parker, this amenity-rich 14-building project will span 30 acres in Aiken, SC, while the terms of the seven-year loan include a competitive fixed interest rate and loan-to-cost of 60%.
The team also secured $85 million in financing for a Class A industrial asset just outside JFK Airport in Queens, NY. The industrial condominium spans the first two floors of Terminal Logistics Center, a newly built five-floor facility designed for both industrial and self-storage purposes, and the tenants include a global airline catering services firm.
The Twin Pillars of Technology and Teamwork
In addition to filling out its team of originators with the best and brightest from around the industry, MMCC provides cutting-edge proprietary tech that puts them at the front of the pack. This robust platform keeps originators connected with one another, giving originators unique insights throughout every phase of a deal.
“We have internal systems that allow us to see terms lenders are offering in each of the few thousand transactions we typically close annually,” explains Montalto. “We have multiples of this from the thousands of quotes we get annually. These data points and knowledge allow us to create a market on behalf of our clients, and ultimately provide them with superior capital solutions.”
By constantly sharing this proprietary information throughout the company, each originator can leverage MMCC’s massive resources to provide each client a superior capital solution based on their unique needs. “When a client hires me, they’re hiring all of IPA Capital Markets,” says Montalto.
Of course, this spirit of camaraderie doesn’t stop at the limits of the CRM. It’s a collaborative environment that has allowed MMCC to grow even in a challenging environment.
“If you need help, people raise their hands without any expectations,” says Anita Paryani-Rice, Senior Managing Director at IPA Capital Markets. “Internal connections are so important because they help us to help our clients.”
As interest rates creep down and capital markets begin to loosen up, the team at MMCC is in a commanding position heading into Q4 and 2025.
“It’s been a great first year for us here,” says Herzog. “We’re looking forward to continuing to grow our team and provide the best service we can to our clients.”
Visit MarcusMillichap.com/Financing to Expand What’s Possible for financing your next CRE transaction.