Photo – iGlobal Forum’s 6th Real Estate Mezzanine Financing Summit in New York City panel on “How Hedge Funds Operate in the Mezzanine Space.” From left to right: Michael Delrahim, Managing Partner, BROWN UDELL POMERANTZ & DELRAHIM; Daniel Jacobson, Commercial Real Estate Mezzanine Debt & Preferred Equity Investment & Origination, AEW CAPITAL MANAGEMENT; Mark Green, Head of CMBS Capital Markets, JEFFERIES LLC; Coley O’Brien, Director CRE/CMBS Investments, MKP CAPITAL; and Matt Cohen, Principal, MESA WEST CAPITAL
Michael Delrahim BUPD Law’s Managing Partner attended the iGlobal Forum’s 6th Real Estate Mezzanine Financing Summit in New York City last week where he moderated a panel discussion on How Hedge Funds Operate in the Mezzanine Space. The panelists had years of experience in commercial real estate financing and included:
- Matt Cohen, Principal, MESA WEST CAPITAL
- Mark Green, Head of CMBS Capital Markets, JEFFERIES LLC;
- Daniel Jacobson, Commercial Real Estate Mezzanine Debt & Preferred Equity Investment & Origination, AEW CAPITAL MANAGEMENT;
- Coley O’Brien, Director CRE/CMBS Investments, MKP CAPITAL
Delrahim set the stage for the discussion by taking the speakers and guests attending the seminar back through the last ten years of the financial and real estate markets. With today’s low interest rates and high liquidity in the marketplace, hedge funds have available to them alternative investments to equities or fixed-income instruments, the speakers said. Commercial real estate mezzanine debt, secured by a subordinated lien against, or a collateral assignment of the ownership interest in, commercial properties such offices, apartments, retail shops and hotels, has become a product that provides substantial dividends without nearly as much volatility as equities or junk bonds.
Historically, investing in mezzanine debt has been done by institutional investors, the panelists discussed (pension funds and sovereign wealth funds). However, money managers have launched real estate investment funds focusing on mezzanine financing alongside senior loans. Nearly $1.7 trillion worth of commercial mortgages will mature between 2015 and 2019, which will create even more opportunities in the market. There are now different products to sell and others areas to finance, including abroad and corporately. Higher yielding mezzanine debt in a stable market is a lower investment risk than it was in the bubble of 2007, and banks and mezzanine lenders have been more conservative than in recent years. While all the panelists and Delrahim seemed quite bullish on the market and the commercial real estate industry, the one big question was not if, but when, interest rates increase, how would that effect mezzanine positions and the risk profile of a mezzanine loan investment.
The iGlobal Forum was attending by nearly 175 senior real estate and hedge fund professionals.