By Al Barbarino
Eastern Union Commercial, one of the largest privately owned real estate mortgage brokerages in the country, has witnessed exponential growth over the last few years.
Loan closings in the first quarter increased by more than 100 percent compared with last year, and the company has seen a 50 percent rise in average loan volume over each of the last three years.
But for Ira Zlotowitz, 36, president at the New York City-based firm, bigger is definitely not better.
“The vast majority of transactions are smaller deals,” Zlotowitz said. “Obviously there are $200 million deals out there, but those are few and far between.”
While the company has financed deals over $100 million, the focus remains on financing loans under $50 million. Over 90 percent of all transactions in New York City and nationally are under $30 million, Zlotowitz said.
“I’d rather have the ability to close a deal of any size and claim a niche where I can really wow people,” he said.
Among the loans the firm originated in the first quarter of 2012 was the $34 million refinancing of a four-building nursing portfolio in New York and New Jersey; a $12.5 million bridge loan for a 322-unit apartment portfolio in Lanham, MD; $17 million for a blanket loan on four elevator apartment buildings in Washington Heights and Inwood; and the $28.4 million refinancing of two medical office buildings in Newark, N.J.
The company has grown to produce annual transaction volume over $1 billion — what Zlotowitz called “the perfect size.” It wasn’t achieved by working with owners of high-end properties, but through working with those who own multiple properties at the lower end of the spectrum and often become repeat customers.
In fact, it’s the portion of the market in need of loans under $10 million that is particularly underserviced, Zlotowitz said.
“We have clients with 40 or 50 buildings and not a single property above $5 million,” Zlotowitz said. “They’re not serviced right in the market because the brokers at the small shops don’t necessarily have the right relationships to help them out and the brokers at the bigger shops would rather work on one big deal.”
To carve out the niche among these property owners, Zlotowitz has invested energy and resources into redeveloping his firm and adapting infrastructure to the “whirlwind of change” that occurred in the industry during the recession.
“Prior to 2007, (the industry) treated commercial real estate almost as a total commodity — it was a volume-based business,” Zlotowitz said. “Whoever brought more volume to the table would be able to get anything done. Almost anything went within the scope of a very broad box.”
Many would argue there was a failure among lenders to recognize the intricacies of each loan at the peak of the market. But today it’s back to the basics, Zlotowitz said.
“There’s a story to every loan,” he said. There could be violations on the property, lease rollovers, or blemishes in the principal amount. Pre-2007, most of these concerns were simply “pushed through.”
During the market’s heyday, the average broker might approach three or four banks to find the loan. Today, it’s more like seven or eight, as banks bring a higher level of scrutiny and more variables are considered, Zlotowitz said.
The trick is finding the right solution for the client, even if that means paying slightly higher interest to close faster, or getting a slightly smaller loan if the client is given the option to come back for a second loan.
“We separate ourselves with the knowledge and education that we bring to the client because we understand their needs and we have the pulse of the industry,” he said. “Everybody wants the highest dollar and the lowest rates, but you have to make sure the details match.”
With increased specialization came big changes in the makeup of the firm. In 2006, Eastern Union Commercial had 10 offices and 110 brokers. Today, there are three offices — in New York, New Jersey and Maryland — each with roughly 25 to 30 brokers and 25 to 30 members on support staff. That means brokers are doing more business than ever before, backed by more resources and educational support than ever.
“The brokers were trained not just in passing the paperwork back and forth, but actually understanding all the details of each transaction, and also understanding credit, and why some deals work and why others don’t work,” Zlotowitz said. “You have to understand how credit works to navigate the market.”
When Zlotowitz, a native Brooklynite, was a 19-year-old rabbinical seminary student, he founded Masmid Govoha, a program designed to motivate sixth and seventh graders to advance their Hebrew studies. He started with 40 kids. Today there are 2,700 participants in cities all across the United States. The program is based on a system where every student is rewarded based directly on the number of hours they are willing to put in.
“The biggest motivation is recognition and positive reinforcement and every kid has the same exact chance to succeed,” he said. “Everyone wants to be recognized for their hard work.”
It’s something that resonates at his firm. Zlotowitz said he never turns a prospective employee away because they might not have experience, or an educational background in mortgage brokerage, often training them “from scratch.”
“I assume everyone is trustworthy and bright when they walk in the door,” Zlotowitz said. “If you fall down, I’ll help you get back up. I have never had a top broker leave me when they were at the top of the market, or with any animosity.”