Stephen Palmese knew it was time to take a risk.
He had missed out on buying during the downturn that followed the Global Financial Crisis — it had been too early in his career, and he didn’t have the capital or the confidence to buy up buildings on the cheap. So in summer 2020, he decided he wasn’t going to let opportunity pass him by again.
He started buying land in the Southeast. Then, when interest rates and borrowing costs rocketed up, Palmese realized there was a different opportunity for the capital he had gradually amassed.
“The vacuum of availability of credit, in a space that I had spent 20 years being surrounded by, was just too much of a ‘seize the moment’ opportunity,” he said.
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Palmese left JLL in February 2024. He had been one of the firm's top New York sales brokers. His exit wasn’t easy — he’s still being sued by his former employer over a forgivable loan that JLL claims he had agreed to repay if he left before 2027.
But neither an ongoing lawsuit, which Palmese says is close to being resolved, nor a tough economic environment has proven to be a stumbling block for his new firm.
He founded Integritas Capital, the $1B credit lending arm of his acquisitions firm, Legacy Equity Holdings, and issued its first loan in March 2024: $53M on an undeveloped 12.5-acre parcel in Red Hook that Gowanus Bay Terminal owner John Quadrozzi Jr. plans to turn into a 150K SF industrial building.
Over the next 15 months, Integritas has put out $700M in lending with an average loan size of $80M. It has drawn investment from family offices, high net worth individuals and institutional investors, is backing a project by Adam Neumann’s residential firm, Flow, and even has more than 1M SF of its own planned developments.
The combination of the current risk-averse investment environment and massive demand for lending on multifamily development has created an opening for the type of lending Palmese is specializing in: developers with shorter track records than institutional darlings.
“All of the traditional capital, whether that's banks or traditional lenders or nonbank lenders or hedge funds, they all want to finance the best projects in the best market with the best sponsors,” he said.
“There's a perceived risk that independent developers don't have the credibility or the capabilities,” he added.
The fact that banks are still skittish about lending to most developers allows private lenders like Integritas to drive a harder bargain.
“We're a little bit more expensive, but we have to be a little bit more hands-on because of that, which plays really well into the capital that I've raised,” Palmese said.
In March, Integritas partnered with Bravo Property Trust to lend $125M on an office-to-residential conversion at 175 Pearl St. in the Dumbo section of Brooklyn.
Before Palmese agreed to do the deal, he toured the 200K SF project with the developer, Watermark Capital Group. He said he talked Watermark into adding 10 stories atop the building instead of nine and using the ground floor for parking instead of apartments.
“We're even opining on floor plans. If we don't like the floor plans of a project, we're not lending on it,” he said. “I think there's a certain level of granularity — I think others may want to adopt this as well — that we undertake.”
Some of Integritas’ deals happen because of preexisting relationships, like its partnership with Invictus Real Estate Partners on a $155M construction loan on Flow's 40-story, 466-unit Miami condo project in April.
“[Invictus Managing Partner] Eric [Scheffler] has a relationship with Flow, and we partnered with Invictus before we started Integritas. We partnered with Eric a number of times,” Palmese said.
Although the deal came via Invictus, Palmese made sure to meet Neumann, one of real estate's most prominent oddballs, in person before signing on.
Neumann is “just as much as you anticipate — big personality, big thinker, an infectious personality,” Palmese said.
“You see a vision as he's speaking. That's probably the best way to describe how I left a short interaction.”
Palmese isn't just lending on towers in South Florida. His time making under-the-radar purchases while still working at JLL presented him with an opportunity to make his first big splash as a lead developer.
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Palmese bought a nearly 1-acre parking lot in Fort Lauderdale for $6.6M, navigated the property’s outstanding easements and lawsuits, and is now preparing to build a 57-story tower with 550 apartments and 253 hotel rooms on the site.
Integritas' prolific string of deals and projects is drawing interest from an increasingly wide range of investors, Palmese said. He was initially seeded by a family firm he worked with as a sales broker — which he declined to name — but has since taken on investments from hedge funds, asset managers, high net worth and foreign investors.
“They're starting to say to us, ‘Hey, can we talk about a small managed account? What if we give you a small managed account for a specific strategy?’” he said. “I'm seeing more opportunities on a daily, weekly basis than I did when I started in March of last year.”
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