One year later: The success of the Greystone-Cushman & Wakefield JV

Global real estate services firm Cushman & Wakefield acquired a 40 percent stake in Greystone’s agency, FHA and servicing platforms for $500 million in December. The deal was billed as a one-stop shop for investors’ capital and advisory needs when it was announced last October. Real estate finance firm Greystone planned to use the investment to create new product offerings while Cushman & Wakefield would be able to offer its clients a range of debt products for acquisition, refinancing, rehabilitation and new construction.

Multi-Housing News checked in with Steve Rosenberg, founder & executive chairman of Greystone, and John O’Neill, president of multifamily capital markets at Cushman & Wakefield, on how the strategic joint venture has been working for both firms. MHN spoke with Rosenberg about the JV and other Greystone initiatives, including the arrival of a new CEO and the firm’s interest in acquiring a bank.

What are the biggest benefits to date of the strategic joint venture?

O’Neill: Integrating Greystone into our investment sales, property management and appraisal businesses has proven to be incredibly impactful for our people and clients. Greystone shares three important traits, which have all been on display these past months: (1) a client-centric mindset; (2) we don’t see obstacles, just solutions; and (3) a competitive drive with a sense of urgency. This alignment has allowed us to accelerate the power of the partnership.

Rosenberg: We structured it as a Cushman investment in Greystone because as a private company we can be more nimble than if we were part of a public company. We’re able to do things that are much more out of the box. I think all of us would say thank goodness we came together as a public company investment in a private firm because it adds so much flexibility.

By utilizing Greystone’s balance sheets strategically, I think we’ve been able, to a large extent, give Cushman a real leg up on the competition when they are competing for business. I think all the Cushman employees realized the power of the Greystone balance sheet and our ability to provide not only permanent financing but also bridge loan financing, more shorter-term financing. They realized that and they realized what it could do for their business. That said, I would say some Cushman brokers realized it more than others. The idea of educating more of their sales force to the benefits of Greystone is a process. I will also say that we are seeing across the board that Cushman investment sales folks really want someone sitting next to them that can provide debt solutions. They want a real partner to go and pitch business with them. We are trying to be that partner.

One of the absolute blessings of the partnership that we didn’t anticipate is Cushman’s property management platform—formerly called Pinnacle—that provides market data that we’re able to get that helps us on underwriting.

We see the expansion of the relationship going beyond multifamily. We thought it would be just multifamily, but there’s just so much opportunity.

What opportunities beyond multifamily are you looking at for expansion?

Rosenberg: They have clients that are the leasing brokers for life sciences clients. I think Greystone could potentially provide financing for those clients when they have to fix up their space before they move in or if the owner of the building has to fix up the space before the client moves in. We could provide a loan to the owner of the building.

What that really leads into is that the co-CEO & president of First Republic Bank, Hafize Gaye Erkan, joined Greystone in September as CEO. So, a bank is clearly in our future. We’re already on the hunt and, hopefully within the next few months we’ll be able to make an announcement on a bank acquisition. Having a bank will give us access to low-cost funds and all those low-cost deposits. It will also provide lines of credit to our clients and Cushman clients and just a whole suite of services that we can’t provide if we’re not a bank.

What are the biggest successes to date with the Greystone/C&W joint venture?

O’Neill: In partnership with Greystone, we’ve executed a variety of debt executions—ranging from agency (Fannie Mae and Freddie Mac) to their bridge fund as well as across types of multifamily (core, value-add affordable) and health care. The partnership has closed or is working on over $500 million in new loans. Some key wins include agency financing for the largest multifamily portfolio sale in Indiana’s history; a $61 million Fannie Mae execution in Seattle; and a $67 million bridge to HUD loan for a health-care portfolio. In addition, Greystone’s creativity paired with the strength of their balance sheet has given Cushman & Wakefield brokers a competitive edge. C&W has been awarded more than $3 billion new listings as a result of leveraging the relationships across the joint venture.

Rosenberg: I think the main point is the level of engagement. I think the level of engagement – that we were asked to quote $6 billion in the first six months—is an indication that people are hungry to work together. Now the mission is how we make sure those quotes turn into deals closed is where we have to turn our attention.

Have you been able to increase bridge loan production? Are rising interest rates impacting bridge financing?

Rosenberg: There’s no question that the rising interest rates have affected the bridge market but in a very positive way I think for Greystone. The reason I say that is that over the last several years, most of the multifamily acquisitions have been done from private bridge funds as opposed to using the agencies. So most of the business was moving in the direction of the bridge funds. Because the interest rates are rising now, especially with an inverted yield curve where interest rates are higher in the short term than they are in the longer-dated interest rates, the agencies are really coming back into vogue very fast and very strong. We anticipate our agency business is really going to start flying and engage much more than it has in the last couple of years.

Second, because of the rising interest rates there are billions and tens of billions of bridge loans that now cannot be fully refinanced with a permanent loan. What Greystone is planning to do is we want to position ourselves to be able to buy those loans, refinance as much of the loan as we can for the senior loan and keep the junior loan on our balance sheet. Because we have liquidity, because we have the capital in place to do that and because we have partners that want to work with us to make that happen, I think we’re uniquely positioned in the market to take advantage of an absolute market need at this point.

Prior to the pandemic, Greystone had acquired C-III Asset Management (C3AM) and has been building the special servicing end of the business. How did that play out during the height of the pandemic and do you foresee growth in that part of the business?

Rosenberg: I do. The team has been fantastic. We thought it was a good investment. We loved bringing on the business, but we didn’t see the huge benefit that was delivered to us at the beginning of the pandemic. Maybe three weeks after they arrived, we had the ability to start buying B-pieces of securitizations, the junior-most pieces, at a severe discount because we had confidence in their ability to really anticipate what the value of the underlying properties would be.

I certainly see the business expanding. As a matter of fact, Wells Fargo is doing their next billion-dollar commercial loan securitization and they picked us as the B-piece buyer and the special servicer for their securitizations. (Editor’s note: This interview occurred before the announcement that Greystone would be purchasing the B-piece of a $1.09 billion new-issue securitization from Wells Fargo, Morgan Stanley, Bank of America and NCB and would be serving as the special servicer for the conduit offering.)

I think having that team in place and our ability to buy the B-piece of a large securitization also positions our CMBS team with much greater flexibility than most other CMBS teams that might quote a deal to a client but can’t guarantee that the B-piece buyer will be there and will like that deal. There’s a lot of trading that sometimes happens at the 11th hour. Because we are a B-piece buyer, we can assure the client that won’t happen.

The CMBS market has slowed down. Do you see that as a temporary situation?

Rosenberg: I’m actually really excited about the CMBS business because of the fact that it has slowed down. The spreads are coming back. And so, it’s getting better. But the fact that it slowed down also enabled us to differentiate ourselves. We want to be the go-to CMBS player in the country. I think the way we do that is with utilizing our balance sheet offering mezzanine behind the CMBS loan.

Greystone also recently expanded its DST investment business with a strategic alliance with Passco Cos. What are the expectations for DST investments for the remainder of this year?

Rosenberg: I think there are huge opportunities there. The team at Passco is wonderful. Because of our relationship with Cushman, we have the ability to help a little bit in terms of driving multifamily business to Passco. We can make sure that Passco knows of and is involved in all of the bidding processes going on in the country from Cushman.

We’ve already provided a $50 million additional equity line of credit to Passco, enabling it to acquire more multifamily properties. So far, the velocity (for 1031 investments) has stayed pretty constant.