Marcus & Millichap Inc. (NYSE: MMI) is already a major player in providing debt and equity financing solutions to the commercial real estate industry, and the company is raising that bar even higher as it pushes forward with additional growth.
“Over the years we have built a dominant business in the private client segment. We will continue to build upon that dominance while we also capture a greater share of the institutional market,” says Evan Denner, executive vice president and head of business at Marcus & Millichap Capital Corporation (MMCC). MMCC has been providing capital solutions to its private clients for more than two decades. To further expand its capital markets reach, the company launched a capital markets team within its Institutional Property Advisors (IPA) division last year.
The IPA Capital Markets practice group works in lockstep with its partners on the investment sales side to provide superior capital solutions to institutional clients with deals that are typically $20 million and greater.
The company’s growth momentum is showing up in deal velocity. In 2021, the capital markets team closed nearly 2,500 transactions nationally across all property types. That volume equates to closing 1.2 transactions every business hour. “Deals beget deals, and we have so much knowledge, not only from the deals that we do on the capital markets side of the business, but also with our research group and investment sales volume,” says Denner. For example, Marcus & Millichap’s renowned research group publishes over 1,000 research reports annually across all property types and in different markets across the country.
Even if the average deal only generates a few capital quotes, that translates to 10,000+ quotes annually.
That data is really important to our clients and it allows us to go and clear the market for them, says Erika Banach, first vice president, corporate development and strategy.
Marcus & Millichap has also developed technology that puts all of that information at the fingertips of its originators. The team can see in real-time what capital sources have quoted over the last 30, 60 or 90 days, who closed the deals, what type of deals are getting done, deal size and geography, among other important data points. “It’s a really powerful resource that most firms don’t have,” she adds.
Adding scale and expertise
Growth of the capital markets platform has been propelled by a series of strategic investments over the past two years. Marcus & Millichap acquired Dallas-based Metropolitan Capital Advisors, Houston-based LMI Capital and Mission Capital Advisors, a leading loan sales and trading platform. They also entered into a strategic alliance with M&T Realty Capital Corporation, a subsidiary of M&T Bank, which provides streamlined access to the agencies. Most recently, the firm acquired the Eisendrath Finance Group, a leading multifamily origination platform, earlier this year.
“I have been at MMCC/IPA Capital Markets since 2004 and am impressed as to how the firm has evolved in the last 18 years with the addition of various capital markets teams and leadership, which creates positive synergies throughout the organization. The evolving relationship between sales and debt platforms creates a best-in-class platform for both buyers and sellers,” says Anita Paryani-Rice, senior managing director, capital markets, Institutional Property Advisors (IPA) in Los Angeles. “In this tumultuous capital markets environment, understanding the debt is critical for every transaction and having investment sales professionals and originators in the same office has proven to be critical to many successful closings through the years,” she adds.
MMCC also continues to prudently and strategically grow its platform with the right talent, including the recent addition of Pete Fehlman to focus on hospitality transactions. Fehlman joined from Hodges Ward Elliott and has a 20-year track record in hospitality finance.
“MMCC is a high-energy organization with exceptional strategic direction and momentum. I’m excited to be joining a talented national team of finance and investment sales colleagues where our collaboration enhances our capabilities, provides access to the latest market data points, and delivers certainty of execution to our clients. I look forward to engaging MMCC’s deep pool of resources to help our clients with every facet of their investment goals,” says Pete Fehlman, managing director, capital markets at MMCC in Dallas.
Insights drive successful closings
Relationships are incredibly valuable in the current market, and in 2021 alone the capital markets teams closed transactions with over 440 different capital sources. “We have the ability to pick up the phone and connect with capital sources to tell our client’s story, which is important because the repricings are currently happening in a vacuum,” says Marc Sznajderman, senior vice president, head of production, Eastern Region for MMCC. “It’s understandable that when the market moves, lenders may have to move accordingly, and because of these relationships we’re able to have conversations and work to negate the impact it’s having on our clients, which is really critical in this market.”
For example, IPA’s capital markets team in Los Angeles was recently working on securing a $100 million financing for a three-asset multifamily portfolio in a Dallas submarket. That deal was down the path on securing financing from a debt fund with hard dollars committed. However, due to market volatility, the debt fund that had committed dropped out of the deal. The L.A. team was able to quickly pivot and work with IPA Capital Market’s Dallas office to move the transaction to two Dallas area banks and complete a successful close, showcasing the power of the team’s national platform and ability to identify new capital sources on the fly.
When navigating through market volatility, it is vital to stay focused on your area of expertise and adapt to your client’s needs. Together with the MMCC team, we have been able to find innovative financing solutions to ensure we bring transactions over the finish line, says Chris Marks, senior managing director, capital markets, at MMCC in New York.
Borrowers are facing more financing challenges in the current market with rising rates, and lenders that are moving in and out of the market. There is still liquidity to get deals done. However, it is important to understand where to look for capital for a particular deal and have the agility to find alternatives if things shift, which has become more of the norm in the current market.
“Our platform has allowed us to showcase that we have the skillset, the knowledge, the capital relationships and the market gravitas to secure capital across any property type and any financing structure,” Denner notes. “Over the past few months, those qualities have been especially critical in getting deals across the finish line.”