Its performance is something of a microcosm
To hear of the loans closed by Eastern Union in 2023 is to assess the state of the CRE industry in a down market.
The company closed loans from 126 banks last year, encompassing properties across 30 states representing 19 asset types. It’s when one gets into the details of the performance that it starts to look like a microcosm of the industry – heavy on increasingly appealing retail and industrial assets, not so much in office buildings currently in the doldrums.
“Nobody can say that 2023 wasn’t a difficult year,” Abe Bergman (pictured), president and co-founder of Eastern Union, told Mortgage Professional America during a telephone interview. “There were clearly less transactions going on in the market. Overall volume was down, nobody can argue that – it’s the market, no question about that.”
Searching for lenders willing to lend was half the job
A main obstacle hit upon a business fundamental: “One of the challenges we realized early on was that the lenders – and I’m using the term lender very broadly; we’re talking about banks, Wall Street, bridge lenders, funds, life companies and everything under the sun – were struggling to do loans,” Bergman said. “And when I say they were struggling, I mean throughout the year it was a cycle where this lender was lending and then the other lender took a pause and then that lender that was lending took a pause and the next lender was lending.”
That roller-coaster ride in just finding lenders drove home an important point, he said. “One of the things we realized early on was part of our job is to find lenders for our customers, and we put a tremendous amount of effort and added staff to really focus on every deal that came in outwards. More than any other year, rather than just saying these are the 30, 40, 50 lenders that cover the whole market and property types, we realized we needed to go out there on each deal and seek out and source a lender that was the right lender for the deal and currently in the market of doing loans. It was a lot of work.”
He added: “But we were able to get a lot more deals done than we would have been able to if we had not done that. Recognizing that you have to go out there and search for who was the lender, who was right, and had the appetite, liquidity and ability to lend that money. It definitely got easier toward the end of the year, but that was the challenge of 2023.”
This year has renewed a focus on investor behavior: “We’re doing this for over 20 years now, and the market has shrunk in the sense of size,” Bergman said. “Investors that we deal with – many of them, a very large portion of them – look to invest nationally versus when I started in the business more than 20 years ago. When you lived in New York, you owned in New York; when you owned in Texas, you owned in Texas.
“Today, that has gone by the wayside. It’s become much more of a business that’s done on a national level versus a local level. It’s about constantly adjusting yourself to your customers. We have clients who live in Texas and own in Georgia; we have clients that live in New York and own in Texas.”
Tale of the tape, from office to retail
Bergman broke down the various asset types that encompassed the company’s dealings last year:
- “There was definitely less office done,” he said. “I wouldn’t say we didn’t do any office but office was really micromanaged on any particular deal. There were some lenders who said ‘hey, we’re just not going to do any office no matter how good of a deal it is.’ But office space was a smaller portion than it has been historically.”
- “We saw a big increase in retail last year,” Bergman said. “Retail went through its recovery period and is viewed today as a very stable asset class.”
- “Retail is made up of different components. You have the smaller mom-and-pop type retail store; you have the larger box retail stores; you have the drug stores. Retail has definitely increased significantly.”
- “I’d say the next biggest increase was industrial, mostly light industrial versus heavy industrial although we bought some of that as well. But the light industrial has grown tremendously. This goes hand-in-hand with the growth in internet sales. Industrial has definitely seen a big uptick.”
- “Hospitality was challenging last year although we closed our fair share of hospitality deals. In a lot of markets, the total space was down so lenders are being more selective about hospitality.”
Bergman said Eastern Union had activity in healthcare asset types, a sector in which he’s seen “big growth.” In the area of multifamily, “we did a lot of construction loans last year,” Bergman said. “We thought with the increase in interest rates and some hesitation in the market, we would maybe see a decrease in construction. But we actually saw a very, very healthy clip in construction.”
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