After merging a commercial bank and a mortgage company to become one of the highest-capitalized banks in Texas history, Cornerstone Capital Bank is starting a commercial real estate capital markets platform.

The Houston-based bank has virtually no exposure to office, retail or multifamily, and it has been eyeing the space for years. Now that interest rates, property values and other factors are settling, its executives say now is the right time to pounce.

The bank's first move was hiring Patrick Ramsier as president of its capital markets CRE platform.

“What attracted me to this opportunity is the balance sheet of Cornerstone Capital,” Ramsier said. “They really don’t have much exposure to commercial real estate, so it gives them an extensive runway.”

The timing of the new platform is opportunistic, and the lack of legacy in the sector puts Cornerstone at an advantage, CEO Scott Almy said.

Banks have struggled with CRE loan exposure, with property values declining and interest rates rising significantly since the start of the pandemic.

“Banks in particular are exiting commercial real estate. They’re dealing with large portfolios and concentrations,” Almy said. “We have none of that.”

Cornerstone will underwrite at values that are already impacted by the pandemic and other disruptions rather than trying to modify existing loans to fit them, Ramsier said.

“If you feel comfortable with the stability of the income stream based on the current valuation, you should be able to make that loan, close it and sleep really well for the next three, four, five, 10 years,” Ramsier said.

Ramsier has almost 40 years of experience, during which he has built multiple CRE platforms and originated more than $6B in loans, according to a news release. Almy and Ramsier had an existing relationship, and they started talking about creating Cornerstone’s CRE platform in 2022.

It was around that time that Cornerstone Home Lending and the Roscoe State Bank merged to create Cornerstone Capital Bank, which had more than $380M in consolidated capital and $1.5B in consolidated assets when the deal closed, according to its website.

While bank executives were happy with its liquidity opportunities at that time, they kept an eye on interest and cap rates to determine the best time to enter CRE, Ramsier said. The debut now indicates a belief that the CRE market’s near future should be at least slightly better than its recent past.

“2022 didn’t seem right,” Ramsier said. “2024, in my opinion, may be a little bit early, but it just feels like a really good time in the cycle to enter the space. Based on our experience, we’re well positioned to do that.”

Cornerstone plans to lend primarily in Texas and across various asset classes, including multifamily, industrial, office and retail, Ramsier said. A dearth of capital allows for very conservative loan structuring, meaning financing even the struggling office sector is possible, he said.

“With granular underwriting, you can underwrite virtually any asset class in this market,” Ramsier said.

Cornerstone has capital to spend, but it doesn’t plan to rush, Almy said, adding it intends to build the platform on a case-by-case basis in a way that makes sense.

“We have this dynamic business plan that’s unique. It’s unprecedented,” Almy said. “It’s going to provide value for shareholders in our communities for a long period of time.”