Commercial real estate finance company NorthMarq, which is part of the Pohlad Cos. family of businesses, will get a new leader early next year, though he will be a familiar face. Incoming chief executive Jeffrey Weidell has been at the company since 2000 when NorthMarq purchased the small San Francisco-based commercial mortgage banking company where he worked. At NorthMarq, Weidell first started as the managing director of the San Francisco office before he worked up to president of NorthMarq in 2013. In the past few years, Weidell has shared some responsibilities with outgoing CEO Eduardo Padilla, who will transition to executive chairman. Weidell discussed the firm’s growing investment sales business, equity advisory services and the Twin Cities’ investment appeal.
Q: You helped launch the investment sales business of NorthMarq last year. What made you want to do that, and why stick to multifamily properties?
A: It started in Phoenix and New Mexico and then we spread quickly into Texas and Southern California and out of Atlanta, Kansas City. You kind of get the general geography that we are spreading from, in the Southwest and then heading east. And there is just multifamily, and there is a reason for that. Because over half of our business as a company is multifamily as a property type. … Our leading lenders are Fannie Mae and Freddie Mac in that space so it’s a market that we already serve, and it’s a market that our clients like that additional service. They like the opportunity to see properties to buy, have us finance them, have us refinance them, have us sell them if you will.
Q: Is there any interest in expanding to multifamily properties in the Twin Cities? What about to other property types outside of multifamily?
A: That’s for the future. We’re not currently coming to the Twin Cities. … Currently the focus is bringing multifamily to additional offices. It’s been successful and our clients like it and it’s a focus. I think that if we go to other sectors, they are going to be tangential to multifamily, like senior housing. There’s a little bit of self storage. We don’t call them mobile homes anymore; they are called manufactured homes. We have a group of that. Initially that’s going to be the thrust. … In the investment sales business, people like to specialize in a property type. So they like to be office salespeople, they like to be shopping center salespeople. We feel that if we are going to commit to a property type, we want to cover it thoroughly.
Q: It seems like it has been harder for apartment developers to find financing and that they are required to put more equity toward projects that they might not always have access to. What are some solutions to that?
A: We have always been involved in multifamily financing. Like most firms, we have typically done long-term, permanent financing. But we’ve seen a lot of activity in terms of requests to assist in finding construction financing. For example, if a developer goes to their local bank, they may have one project with them already and then the bank maybe says, ‘No more.’ … Given the return numbers and the escalation of costs of new construction, there’s often a gap between how much money the developer can invest and what the loan is going to be. If they are willing to put in 25 to 30% equity but the construction loan comes up with 60% of cost, there is a 10 to 15% gap. We try to help bridge that gap [with] mezzanine debt. Is it additional equity? You don’t know until we go to the market for it. For one entity, it could be equity where they are willing to take on a venture partner. For another developer who says, ‘We don’t want partners,’ it becomes a higher yielding mezzanine debt. Oftentimes, we find one lender who wants to bundle together the loan and the mezzanine, so it becomes more like a bridge loan that’s higher yielding but kind of a one-stop shop. That area of our business has been very active this year in particular.
Q: You have helped to expand NorthMarq’s equity advisory business. Why do you think those services are needed?
A: We’ve seen a segmentation of the business in terms of equity and mezzanine that’s required a greater need for a role like NorthMarq’s. Years ago a developer or property owner could find an equity partner who would want to do multiple deals with them. Today a lot of the equity is raised and it has a specific need, [for instance] downtown apartments in these key cities, acquisition rehab apartments only to these levels, retail only and only up to a certain point. It’s very segmented, so an intermediary role like ours is needed. We take on assignments that we know have merit. The deal makes sense, we know equity will find it. We often find ourselves going to 50 equity services to find the right one. … Finding the right one with the right terms to match the partner is difficult.
Q: How do you think the Twin Cities is currently viewed by real estate investors?
A: The Twin Cities has become in many respects, certainly in multifamily and in retail and in industrial, it has almost become an inland coastal market. The desirability of investment because it’s recognized as having an educated workforce, diversified economy, historically low unemployment, stable good returns and consequently is quite aggressively courted by financing sources and highly valued from a cap rate side.