Investors Bank’s chief lending officer, Richard Spengler, has worked for years with Wilcox, and when the two talk about the behind-the-scenes work of getting capital flowing to commercial real estate transactions around New Jersey, they talk about the critical importance of relationships like theirs, which are built on trust. Spengler said Wilcox “has been doing this a long time, and she prepares a very professional package.”
Before Wilcox brings a deal to Investors, she already has done extensive due diligence to guard against surprises that can torpedo a deal. The deal has to be approved by the lender’s loan committee, and Wilcox’s job is to make sure that by the time it gets to committee, all the spadework has been done to make sure the deal is approved.
“There’s got to be something really wrong for a deal not to be approved in committee,” Wilcox said.
Wilcox, No. 30 on the Power 50 this year, doesn’t attend loan committee meetings. Spengler said the senior bank executives at Investors, which is 29 on the list, who sit on the committee play devil’s advocate, trying to identify any potential problems with the loan.
“The committee sits there and almost plays the role of doubting the loan,” Spengler said. The bank’s loan officer, who has worked with the borrower to bring the loan to the committee “is there as the proponent of the borrower, touting the deal, what the strength and weakness is,” Spengler said. The committee analyzes the loan and “takes the weaknesses one step further and challenges the loan officer to defend the loan.”
“I sometimes say the loan committee becomes the deposit committee because we talk about the deposit potential of this borrower,” Spengler said. “We are a bank. We need to have deposits as well as loans, so we analyze what future business is there for us both on the loan side and the deposit side.” Spengler said at Investors, loans of more than $5 million go before the committee.
Wilcox founded her Morristown firm, GS Wilcox, 20 years ago, and working as a loan broker is just part of what she does: Her company is a commercial mortgage banker, servicing more than $1 billion in commercial real estate loans. In her role as a broker, “before we take on an assignment, we visit the site, we run the numbers, do a market study. We will understand the borrower, and we will really do a full analysis on what we think the lending market would lend on a transaction. And then we present a transaction in a very thorough, detailed form.”
And she walks away quite often, she said.
“We walk away because maybe the borrower has not enough experience, or has a bad past,” Wilcox said. “We walk away because maybe the property is not leased and the borrower’s expectations are too high, and we know we can’t deliver that.”
Wilcox doesn’t want to walk away from a potential transaction, “but we’re not going to waste our time if the borrower has different expectations than what we think the lending community can deliver.”
Spengler said that while a broker prepares the transaction, the lender has to spend a fair amount of time with the borrower.
“It is important that we get to the borrower, hear what their business plans are,” he said. “We need to learn the history of the building: Is there deferred maintenance? What’s been the capital campaign on the building, and what do they think might be expended over the next couple of years?”
The history doesn’t have to be squeaky clean, either, Spengler said — provided there’s a plan.
“It’s easy to say no,” he said. “But if a guy comes to us and has a plan to address those issues, it can turn a no into a yes.”
Both Wilcox and Spengler agreed that every property has its own story. It may be environmental problems or short-term leases that could turn over or maybe the rents are poised to change substantially.
Wilcox said the difficulty with some borrowers is “when they have their wish list, they are going to wish for the moon. It is our job to get them the best transaction, and sometimes, it might just be a little bit lower than what their wish list was.”