EverBank Financial Corp.'s new commercial mortgage group says it can compete in a crowded market by making only those offers it can follow through on.
Several commercial mortgage brokers said that they definitely value reliability in a lender's bids and could be swayed to send more business to one that consistently stands behind the pricing and terms initially offered.
But as Robert Kaplan, the senior managing director of Holliday Fenoglio Fowler LP's Miami office, put it, "Every lender on the planet promises that." He and other brokers wondered how EverBank will keep its pledge.
Asked what it does differently, the head of the Jacksonville, Fla., banking company's new small-balance commercial real estate lending group said the vow is more about emphasis than anything unique in its processes.
"We're not trying to build a different angle, niche, or a gimmick here," said Clayton Reese, the group's executive vice president, in a recent interview. "All we're trying to do is focus on the basics and do them well."
According to Mr. Reese, its commitment entails holding back if EverBank does not have enough reliable information from an applicant to be reasonably sure it can follow through.
If a deal falls apart, it "ought to be something that's a shock to everybody, including the borrower," he said.
The "basics" also include hiring experienced salespeople, having underwriters work closely with them, and funding loans only for smart commercial-only brokers (as opposed to residential ones that do multifamily on the side), he said.
"We want to identify deals where we have a high level of comfort on the front end ... so that we have a very high closing percentage on the back end," Mr. Reese said.
He added that EverBank could reduce fallout rates by focusing on "cookie-cutter" deals - loans in liquid markets for property types such as multifamily, retail, and office. These require less underwriting than hotels and other properties with operating businesses. (However, a few brokers pointed out that simple, high-credit-quality deals are less likely to collapse with any lender.)
Seeking loans in "a tight credit box," as EverBank plans to do, will make loan decisions easier, Mr. Reese added.
EverBank hired Mr. Reese (a former senior vice president at Bayview Financial Trading Group LP of Miami) and the commercial mortgage group's other leaders in April. The group will fund loans through brokers and some mortgage bankers nationwide, focusing on loans of less than $5 million.
Blake Wilson, the chief financial officer of the $2.7 billion-asset EverBank, said it started the business to diversify operations in a way that would be counter-cyclical to residential mortgages.
The seven-employee group should double in size by yearend and grow to more than 40 employees in 2005, Mr. Reese said. The sole objective this year is to build the platform - the group expects to close its first loan soon -- but the 2005 goal is to fund about $300 million, he said.
Some loans will be held in the portfolio of the $2.7 billion-asset company's bank, while others will be sold. Eventually, the unit could take part in commercial mortgage securitizations, Mr. Reese said. (Before name changes were put into effect in February, EverBank Financial and its EverBank and EverHome Mortgage Co. were called Alliance Capital Partners, First Alliance Bank, and Alliance Mortgage Co., respectively.)
Mr. Reese said his group has evaluated requests for loans totaling $100 million. So far its approach has not lengthened the loan-approval waiting time, he said, though one way it can make firmer offers is "by having everybody in the process invest a little bit more time."
Either way, some brokers said a longer wait is preferable to a deal that comes undone or an offer that gets changes at the eleventh hour. Sometimes, brokers said, it seems that lenders will make offers they cannot meet to discourage the broker from shopping further or later change offers to increase profits once a deal is headed to the closing table.
"I'd rather have people ask a lot of questions - the more work they do, the more comfortable they feel," said Andrew S. Oliver, a principal at the New York real estate investment bank Sonnenblick-Goldman Co.
