News November 09, 2020
Commercial Observer: Lenders Feature
Commercial Observer asked 20 of the industry’s top lenders, including Josh Zegen, Madison Realty Capital Co-Founder, Managing Principal about market lessons learned during COVID-19 and why the debt markets remain resilient despite these challenging times.
What’s been the biggest market lesson learned during COVID?
There is no such thing as recession-proof real estate; you need a margin of safety in everything you do. No one would have ever underwrote a world shutting down all at once.
How are you winning the deals for which you’re competing most aggressively today?
We have been in business for over 16 years. Madison is one of the few alternative real estate lenders that was around before the global financial crisis, so we have a unique understanding and experience through distressed cycles. At this point, we also have a client roster of repeat borrowers who understand our ability to provide certainty, flexibility and customized lending when it really counts.
How has your loan portfolio fared through the pandemic?
Many are dealing with asset management headaches during the pandemic, but we have fared relatively well. Our portfolio is heavily weighted with multifamily, and very little exposure to hospitality and retail. We’re also not burdened with leverage issues that saddled (and ultimately sacked) a number of mortgage REITs and debt funds with margin calls. We, traditionally, haven’t borrowed with repo or warehouse lines, choosing single-asset leverage instead to leverage our loans. We also have a diversified portfolio from a geographic perspective, given that we have offices in New York City, Los Angeles and Dallas.
Which closed deal, post-COVID, are you most proud of and why?
In early April, at peak crisis, we acquired a $170 million portfolio of performing multifamily loans from a mortgage REIT that was dealing with some margin-related issues. We closed the transaction in less than one week with everyone working remotely but didn’t sacrifice one bit of diligence. I was very proud of our team being able to execute this quickly and efficiently, given the properties spanned across Los Angeles, New York and New Jersey. I was really excited to have the experience, capital and team to execute a unique deal like this and capitalize on an opportune time in the market.