The BIG platform will acquire and originate high-yield performing and distressed whole loans, mezzanine loans, B notes, gap equity and select CMBS investments on behalf of its clients, according to a release. Along with debt investment, BIG will provide origination, lending and underwriting support to third parties on a separate account basis.
In a release, Heyman says that "the lack of liquidity in the current market, coupled with the senior lenders' reluctance to advance more than 60% to 65% of today's property values, creates amazing opportunities for BIG to provide the 'gap equity' or mezzanine debt to fill in the capital gap. We will also target investments in the senior debt and CMBS space in order to create a well balanced, diverse portfolio with attractive risk adjusted yields for our clients."
As president, Heyman will build the debt investment platform, raise and deploy capital, as well as develop, manage and oversee the company's operations. She brings BIG more than two decades of experience in the commercial real estate finance industry, most recently at CWCapital. There, she led a team of 80 professionals that originated more than 500 loans totaling in excess of $6 billion in fixed, floating and mezzanine lending collateralized by commercial real estate assets--including JEMB's.
Heyman tells GlobeSt.com that JEMB's move into debt investment is an example of thinking outside the box as well as an extension of its core strengths. "The debt market is an arena where JEMB has not played before," she says. "They've been focused on making equity investments as an owner, manager and developer. In the current environment, you really cannot achieve equity returns that are north of 10%. In the debt space, you can get those returns."
By bringing together the 30 years' experience of JEMB founding principals Morris Bailey and Joseph Jerome with Heyman's finance background, "We're combining the debt and equity expertise under one platform," says Heyman. "We believe that in order to really make the right decisions in this environment, which is much more challenging, you have to look at it from an equity owner's perspective."
What this means, Heyman adds, is "looking at the real estate and saying 'what happens if I own it?' That's a mistake a lot of lenders make--they look at it as just the debt. You can have an outstanding property with great fundamentals and the wrong loan. That's what's going on in the New York market right now: great properties, wonderful sponsorship, too much leverage."
JEMB's local holdings include Herald Center, Herald Towers, 150 Broadway--where it's headquartered--and 75 Broad St. in Manhattan as well as 375 McCarter Hwy. in Newark. It also controls Pocono Manor Inn & Golf Resort in Pennsylvania; the James Center office complex in Richmond, VA; Place Dupuis in Canada; and the Galleria Corporate Center in Scottsdale, AZ; among other properties.
Given this background, "We have the ability to actually own and manage the property if something were to go bad," Heyman tells GlobeSt.com. "A lot of people buying debt and doing things now, even after the meltdown, don't have that ability. They say, 'we'll buy it because it's 70 cents on the dollar.' But what happens if you're wrong? What are you going to do with it?"
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Paul Bubny
Paul Bubny is managing editor of Real Estate Forum and GlobeSt.com. He has been reporting on business since 1988 and on commercial real estate since 2007. He is based at ALM Real Estate Media Group's offices in New York City.
