JackChat April, 2018

For almost 40 years I have enjoyed “tilting at windmills” in and around the Commercial Real Estate Industry. Two of my favorite rants have been directed at the Portfolio Lenders (early 90’s) and the Conduits (late 90’s).

To the Portfolio Lenders, since way back in the 90’s, I would say, “look at the new entrants; how can you use the capital markets for your benefit instead of fighting with them for market share?” To the Conduits, later, but generally in the same period, I would say, “but what about relationships? The earth does not crack open and out pops a mortgage to securitize; how can you be more responsive to the needs of the borrower and the mortgage banker?”

In February’s issue of JackChat I bemoaned the existence of all the new “Alternative Lenders” (“Shadow Banks”) who have raised money for short term, floating rate, bridge loans (that are levered in order to create their yield promised to investors) and have seemingly flooded the marketplace. I worried out loud that not everyone has had the requisite experience in the space to succeed for their customers and capital investors. The world does not need another lender. However, the world does indeed need to face the inherent problems created in the lending markets stemming from the DNA of the capital markets origination process (post RTC). I think I found an answer.

I have recently joined Jonathan Roth (former President of Canyon Capital), Toby Cobb and Justin Kennedy (former co- CEO’s of LNR, and longtime Investment Bankers at Deutsche Bank) as a managing partner at 3650 REIT.

3650 (Thirty-Six Fifty) REIT is a fully integrated, national CRE investment and services firm headquartered in Miami with offices in New York, Chicago, and the Los Angeles area.  For more than 20 years, 3650 REIT principals have played leading roles in the evolution of the CRE debt markets with track records of success across CRE lending, mortgage banking, capital markets, loan servicing and distressed credit management.

3650 stands for the firm’s commitment to borrowers and equity partners: 3,650 days to service and asset manage each ten-year loan with the goal of helping borrowers and equity partners maximize cash flow and grow value in the rapidly evolving CRE landscape.

3650, named for the number of days in a 10-year loan (and we will be in relationship with our sponsors every one of those days), is a Balance Sheet Portfolio lender focused on Relationships with great property owners (borrowers) and mortgage bankers. We will hold these loans (contractually have agreed to never sell these loans) on balance sheet, service these loans (contractually have agreed to always participate in  the servicing of these loans), be in relationship with borrowers, standing by their projects to administer a lease approval, loan modification, loan extension, or whatever the sponsor believes the project needs for enhancement of value.

We hope to replicate the best practices of old from the Life Insurance Company Correspondent system, as well as local bank relationship management and loan origination processes; all the while using the capital markets to help us hold the loans on our balance sheet for the duration. The commercial context of the business is to build a Debt Asset Manager; the cultural context of the business is to build a Relationship Lender focused on the Outcome the Customer is seeking at that unique period with his property.

I wanted to shout out and thank everyone who I have met with, talked to, strategized with over the last 15 months for their kindness and help. Darkknight Ventures (and those existing investments and clients I currently serve) will indeed stay alive, active, and current even as I participate with my partners in the exciting build of 3650.

Press coverage

http://3650reit.com/wp-content/uploads/2018/04/3650-REIT-Launch-Press-Release-4.5.pdf