CRE Finance Firms Make Big Moves To Ramp Up Multifamily Lending, Affordable Housing
Three commercial real estate finance firms have beefed up their multifamily lending platforms with hires of former top federal housing officials over the last two months.
The moves make the market for placing multifamily loans even more competitive, and executives at the firms say they are ramping up their affordable housing lending strategy as they expect a greater focus on affordability from the Biden administration.
Walker & Dunlop announced March 1 it hired Dana Wade, who previously served as the commissioner of the Federal Housing Administration, an agency under the umbrella of the Department of Housing and Urban Development. Greystone two days later announced its hire of Lamar Seats, who previously served as deputy assistant secretary of multifamily housing programs for HUD.
Those moves followed Meridian Capital Group's announcement on Jan. 27 that it is launching a new agency lending platform in partnership with Barings, and the platform will be led by former Freddie Mac CEO David Brickman.
The Meridian Capital move represents the largest change in strategy of the three; the firm, which traditionally focuses on brokering deals, has moved to launch a serious lending arm.
For Greystone and Walker & Dunlop, the hires represent an effort to bolster their multifamily lending platforms by bringing in leaders from HUD who can help them increase their focus on using government programs to do affordable housing deals.
In November, the Federal Housing Finance Agency announced new 2021 multifamily loan purchase caps for Fannie Mae and Freddie Mac totaling $140B. And it said at least 50% of the loans are required to be used for mission-driven affordable housing, up from 35% last year.
"Across the board, you're seeing more of a focus from Washington at the congressional level, as well as the West Wing and agency level, on affordability and affordable housing, which as we know there's been an undersupply," Walker said.
He said he expects HUD Secretary Marcia Fudge, who was sworn in last week, to make affordability for single-family and multifamily housing a top priority. He also said that Sen. Sherrod Brown, the Ohio Democrat who took over as chair of the Senate Banking Committee when his party flipped the chamber, is making affordable housing a top priority.
President Joe Biden may also be able to appoint a new FHFA chair, an issue that is currently before the Supreme Court, and Walker said he expects a potential Biden pick would have a significant focus on affordability.
Given the increased federal push on affordable housing, Walker said it is important for firms like his to ramp up their platforms with major hires like Wade.
"If we're going to remain competitive to providing our clients with appropriate capital for their needs in the market rate and affordable space, we need to continue to add capabilities, capital and people to growing those businesses," Walker said. "Given the underlying focus on affordability, the continued growth and expansion of our HUD lending operation, having Dana on that team is very much in line with where [we] see future opportunity coming."
Before leading FHA, Wade worked for the Office of Management and Budget and for the Senate and House of Representatives committees that deal with housing finance. At Walker & Dunlop, she will serve as chief production officer for all FHA-backed loan originations.
Wade told Bisnow that she joined Walker & Dunlop because of its top-ranked performance on multifamily lending and because of its employee culture. She said her understanding of government housing agencies will bring immediate value to the firm.
"We know, for better or worse, government is a large part of the housing finance system, and I know the ins and outs of government. I can dig into any budget anywhere," Wade said. "That's going to be a really good thing to round out the team of experts at Walker & Dunlop."
Wade said the Fudge appointment, the hires that Fudge has made thus far at HUD and other appointments that Biden has made signal a strong emphasis on affordable housing from the administration.
"What I've seen from the new administration has been very positive," Wade said. "Secretary Fudge is committed to expanding the supply of affordable housing, and she's also committed to working in a bipartisan manner, and she has brought on a lot of very impressive new hires."
Seats told Bisnow that his experience in government, where he led multifamily programs at HUD for three years, will be valuable for Greystone. He previously worked in the private sector at several firms including M&T Realty Capital, Bellwether Enterpise Real Estate Capital LLC and Enterprise Community Investment.
"Being there for almost three years and having all of the numerous programs report to me, you understand the process there and why the process is what it is, which is somewhat of a bureaucratic process," Seats said. "Having the knowledge of how the machine works and, frankly, how the sausage is made down there is very valuable to any business."
At Greystone, Seats will serve as senior vice president and oversee origination teams that will handle multifamily, affordable housing and construction finance through HUD programs. He said his goal is to improve the firm's affordable housing capabilities.
"While we're currently very involved in affordable financing, I want Greystone to become a market leader in affordable financing and the lender of choice when there's a [Low Income Housing Tax Credit] deal in the market," Seats said. "I want us to have name recognition attached to the affordable space. That is going to be a major focus of mine going forward."
Alfonso Costa, who served as HUD's deputy chief of staff for two years before joining investment firm Falcone Group in August, said he sees the Walker & Dunlop and Greystone moves as validating the success of HUD's multifamily lending programs.
"I think lenders understand the importance of their HUD multifamily lending platforms amongst all their other lines of business," Costa said. "The volume that HUD has consistently spurred over the years positively impacts the agency’s goal of facilitating quality affordable housing development, and this will be even more critical in the coming years as the economy bounces back from the pandemic."
Meridian Capital's partnership with Brickman to launch a new agency lending platform will add another player to an already competitive market.
The partnership between Meridian Capital Group and Barings created a new agency lending platform that will operate as a stand-alone business, Barings Multifamily Capital, with Meridian as the majority owner.
Brickman will lead the new platform and will also serve as executive chairman at Meridian, working alongside its CEO and president to shape the firm's strategy. Brickman spent the last 21 years at Freddie Mac, including six years as the agency's head of multifamily and two years as CEO.
"Our partnership with Barings will enable us to join forces with one of the world's leading asset managers and reintroduce Meridian to the direct agency lending arena," Meridian CEO Ralph Herzka said in a release. "The addition of David Brickman to our executive team will mean that we are working alongside one of the most prominent multifamily experts in the country."
Eastern Union President Ira Zlotowitz, whose firm competes with Meridian Capital in the brokerage business, said he sees the move as a major shift in the industry. He said Meridian is now positioned as a competitor to lending firms that it previously partnered with as a broker.
"You're taking a broker, Meridian, who could have been feeding a lot of business to certain shops, and not only are the lenders not going to get that volume, you now have a competitor that wasn't really competing heavily in this arena," Zlotowitz said.
"Bringing on Brickman changes the whole dynamic," Zlotowitz added. "The real question is 'how are the other players going to react?' I think their reaction is going to be to beef up their own operations."
While the move may add another competitor for lending firms like Walker & Dunlop, Walker said he's not worried.
"There is no one person or one firm that will make this market any more competitive than it already is," Walker said. "This is an incredibly competitive market. It will always be a competitive market. So I do not lose sleep at all about what David Brickman is doing, what Meridian Capital is doing, when every day we go and compete with the likes of CBRE, Wells Fargo and Goldman Sachs."
Walker said it would take time for Meridian to create the type of "juggernaut" lending platform that Walker & Dunlop has built over the last decade.
"Does David have the opportunity to replicate what we've done at Walker & Dunlop? Sure, but so does anybody else who's in our industry," Walker said. "The issue is being in the market every day, recruiting the best people, providing the capital that's the appropriate capital, and applying technology to make it so your bankers and brokers and underwriters and everyone else on your team have the ability to compete effectively."
Meridian declined to make Herzka or Brickman available for an interview, but it provided a written statement from Herzka emphasizing that it is not abandoning its brokerage business.
“We look forward to the prospect of returning to the direct lending space in the near future but also remain focused on our core business of delivering the best executions to our clients from a strong and competitive field of lenders and are pleased to see so many great leaders joining the industry," Herzka said in the statement.