Donaldson, Lufkin & Jenrette is bringing real estate expertise to its bank loan effort.
The securities firm recently tapped David Gavoor from BT Alex. Brown Inc. to help sell and syndicate bank loans for real estate and real estate- related companies. The move is fresh evidence that real estate companies are becoming more like other Fortune 500 companies in the eyes of investors.
"What's really important and exciting is a confluence of corporate and real estate deals," said Mr. Gavoor, who started at DLJ last month. "There are huge credits to support for REITs, and their structuring is moving more and more toward the corporate structures."
At Bankers Trust, Mr. Gavoor, 37, had worked for three years in the real estate investment banking group, selling and distributing all real estate- related debt and equity products.
He also spent two years at Meenan, McDevitt & Co., a loan sales and trading investment bank.
At DLJ, Mr. Gavoor reports to Stephen Hickey, head of loan origination, sales, and trading. DLJ started building its loan group in June 1996.
Mr. Gavoor said that for a securities firm to compete in corporate syndication, it needs someone with real estate expertise who is devoted to structuring those credits and syndicating them.
"We have everything in place to do it very well" at DLJ, he said.
Traditionally, banks and investment banks have provided debt to private real estate companies with the hope of taking them public when they grow to critical mass.
DLJ is coming at the business from the opposite direction, tapping relationships it has established by underwriting equity for public REITs to win mandates for senior secured and unsecured bank debt.
DLJ, which boasts leadership in the junk bond market, has taken hold of the real estate constituency that cropped up there. In 1997, it was the leading underwriter of junk bonds for real estate companies, underwriting $600 million, or 31.3% of the $1.9 billion market, according to Securities Data Co.
As many real estate companies and REITs tap the high-yield market for debt, "a place like DLJ is strongly positioned to do very well," Mr. Gavoor said.
DLJ has built up a formidable real estate investment banking practice as well.
It was the sixth-largest underwriter of commercial-mortgage-backed securities in 1997, with $3 billion of issues and a 6.9% market share, according to Commercial Mortgage Alert, an industry newsletter.
Other investment banks have made similar moves, hoping to bring their own capital market strengths in real estate to their loan businesses.
Goldman, Sachs & Co. hired BT's Robert Foley last June for its real estate loan syndication effort. Lehman Brothers has had this capability for quite some time. Merrill Lynch & Co. has had a real estate banker on its secondary loan desk for about two years.
According to Christopher Birosak, managing director and co-head of loan origination at Merrill Lynch, "Increasingly the real estate markets have been looking for ways to access the capital markets," now that the business has moved away from what had mostly been a single-project lending business.
Merrill Lynch, the top equity underwriter for real estate investment trusts, is hoping to bring relationships it has established in the REIT initial public offering arena to its lending business.
Having created so many public REITs out of private real estate companies, "it is important for us to support that business in our product" as those companies grow, Mr. Birosak said.