With values improving and margins reasonably attractive, North America president Alec Burger says it's a great point in the cycle to be a lender. "To some extent it's 'back to the future' for us, since we actually grew up as a North American lending business," he notes, although the firm hasn't abandoned overseas markets. It's done transactions in Mexico, Canada, the United Kingdom, France, Japan and Australia, in addition to its US business. "There's a window that's quite attractive in terms of growing our global debt franchise."

The shift in focus was also part of parent company GE Capital's master plan to reduce its overall size. At its peak, GE Capital's holdings were as high as $570 billion, with commercial real estate accounting for almost $95 billion of that total. Today, the parent firm is down to $425 billion, with real estate at a $50-billion share.

That reduction was accomplished by not only letting its high-LTV loans mature, but also by disposing of properties. "As the market has been improving, we've been looking for opportunities to sell office buildings, multifamily and industrial properties," says Begor. Just a few weeks ago, the company shed a 68-property office and industrial portfolio in Canada for $697 million. At midyear, equity holdings accounted for 46% of GE Capital Real Estate's total portfolio.

But the company is quick to point out that it isn't a fire sale. "We're only selling real estate when it makes sense, and that means when the asset is maxed out in terms of value creation," says Burger. "We'll just take our time to bring the equity book down."

At this time, GE Capital Real Estate still owns a $25-billion portfolio of some 2,600 properties (about 135 million square feet) around the globe, and has a 400-member-strong team to manage those assets—or, as Begor puts it, "optimize the portfolio." That is, "Drive rental rates, occupancy and leasing and improve the properties to make sure we have the best building on the block. And then, when the market is right and cap rates improve, to take those properties on the sales block. That's going to be a multi-year strategy for us."

But when it comes to the debt business, the emphasis is clearly on growth. As Burger puts it, "From a resource standpoint, the focus is to maintain and grow the lending portfolio."

The dislocation in the capital markets has also worked in the firm's favor, he points out. "One of the things we like about the lending market today is that about 35% of our competitors are no longer in the market," which has allowed its 60-plus professionals in GE's 10 regional sales offices to keep a very strong sales footprint, he says.

In 2010—when GE actively returned to the financing market— and 2011, the company has completed about $4 billion in originations. It's on track to finish this year at the $5-billion-plus mark.

For GE, the only way to accumulate those numbers was to come out of the gate swinging—and that it did, embracing large, complicated deals that most other capital sources would have shied away from. Take, for instance, a $98-million short-term bridge loan the firm provided for West 7th, a 660,865-square-foot mixed-use development in Fort Worth, TX. Located on the former Acme Brick Co. site, the project is a development of Cypress Equities and the Carlyle Group that was started in 2007 and includes retail space, a movie theater, offices and residential units.

That the project consisted of multiple uses is enough to scare most borrowers, but the circumstances behind the financing were even more complicated. HFF senior managing director Trey Morsbach, who brokered the deal, explains that at the time, the developers had about $110 million in construction debt, obtained in early 2008. The loan was held in pieces by eight different lenders, but as a result of the market upheaval, some of those banks were defunct, in receivership or acquired by other entities.

"In short, the borrowers couldn't get anything done because all the banks had to agree to do any sort of modification or funding," says Morsbach. The client needed to get out of the existing loan and obtain new debt with a single lender—"Someone who understands this project's story and is willing to write a $100-million check on something that's not fully stabilized."

It was 2010, and although the market was healing, it wasn't yet stable. A number of parties expressed interest, says Morsbach, and eventually the developers entered into an agreement with a major name-brand bank that, ultimately, fell through.

"I then went to people at GE, whom I have a long history with and had just expressed interest in getting back into the market, and presented this deal," he relates. "I said, 'Guys, if you really want to get back into this business, here's a great opportunity.'"

There was little hesitation. GE signed on to the deal, and under essentially the same terms struck with the previous bank. "They went through the process efficiently and did a phenomenal job," says Morsbach. "They performed exactly as advertised and my client was ecstatic." In fact, GE subsequently provided supplemental funding for another part of the project.

Experiences like that make GE one of the first capital sources Morsbach turns to when clients need financing solutions. "At a time when a lot of lenders weren't raising their hands to do a $100-million loan on a complex project that took a lot of thought and creativity, they stepped up and did it without any issues," he says. Not only is the firm "phenomenal" on large, complex transactions, he points out, it's also "equally competitive on mainstream business." He adds that the local HFF office has done a significant amount of business with GE on deals worth between $30 million and $70 million.

The deals didn't stop there; GE went on to close even larger transactions with some of the biggest investors in the market, like the Blackstone Group. The firms' relationship spans some 20 years. Their first deals, relates Jonathan Gray, Blackstone's global head of real estate, were in the early 1990s, "when GE was one of the few real estate lenders in the US." In the past 12 months alone, the firms have done three portfolio transactions totaling about $1.5 billion.

"Ours is a long-term relationship; they've been a great lender for us," says Gray, who is based in New York City. That relationship has paid off; GE's $800-million loan to Blackstone for its $1.08-billion purchase of a 10-million-square-foot US suburban office portfolio from Duke Realty Corp. last fall was the lender's first large commercial real estate financing since the Lehman Brothers fallout.

"GE has stepped up, particularly in an asset class like suburban office, where most lenders were very nervous," relates Gray. "But they were comfortable because they knew us, believed in our strategy, knew the asset class so well and the basis on which we were buying on, and therefore the basis on which they were lending."

Another key to that deal, notes Burger, in terms of a lenderborrower relationship during that time, was certainty and speed of execution. "We delivered what we said we were going to, which was important to them," he says. "Certainty of execution is absolutely paramount with any deal. The ultimate test for us on the Duke transaction was that they'd want to do the next deal with us."

It worked. This summer, Blackstone snapped up the 95-property CalWest industrial portfolio, encompassing 23 million square feet worth $2.1 billion, from Walton Street Capital. Prior to closing that deal—which was two years in the making—the firm had acquired the mezzanine debt on the package, totaling some $1.4 billion, from a variety of sources, positioning it to acquire the portfolio. GE provided a $125-million mezzanine loan for that deal.

The CalWest transaction, notes Gray, was very complex. Because Blackstone held the mezzanine debt, the information available to them wasn't "as perfect as we would have had we just acquired a property. Yet GE was able to deal with the imperfect information and the complications of buying a large portfolio, and look through all of that to the value of the underlying real estate collateral.

"They showed real creativity in underwriting and providing the mezzanine financing to us," Gray adds. "And sometimes with CMBSrelated transactions, you have less ability to sell assets, but because GE is a balance-sheet lender, they give us flexibility to execute our business plan, particularly in the context of portfolios like these."

Most recently, GE provided $575 million for the acquisition of a 16.4-million-square-foot US industrial portfolio from Sydney-based Dexus Property Group, which Blackstone bought through its Blackstone Real Estate Partners VII vehicle. Despite its size, the loan was underwritten and closed in less than 45 days.

In addition to being able to handle complex transactions, GE has another factor working in its favor. Namely, its expertise as a major equity player allows the company to approach transactions from a borrower's perspective.

"Their experience as an investor allows them to understand real estate valuations, and that does make a difference," says Gray. "They know the industrial space, they know suburban office, as well as other asset classes. They're able to move quickly and underwrite these large, complicated pools." He adds that the firms will continue to work together, on both domestic and global opportunities.

Being both a lender and an operator positions GE well, concurs Begor. The firm owns about 2,600 buildings around the world, and it handles operations and leasing at each one; this year it expects to spend about $500 million on cap-ex improvements. "We can take that capability as an operator to bring it over to the lender side and really support our borrowers in managing their properties, in terms of bringing ideas over," he says.

Michael Bennett is one of those borrowers. As founder and principal of Bennett Hospitality, a Charleston, SC-based developer of hotels in the Southeast and Montana, he's worked with GE for the past 15 years on nine transactions aggregating about $200 million. As Bennett puts it, the relationship between the two firms is invaluable.

"Whereas most banks I work with don't really understand the hotel business as much as I do, I think GE understands my industry, in some cases, better than I do," he relates. "I know the industry in the communities in which I operate, but they know the business on a global level. So when I'm looking to do a deal in a different market, I use them as unofficial advisors or sounding boards, if you will. They have a very informed, educated workforce."

For Bennett, GE made an impression from the first day he met with the lender. At the time, he had just completed his first hotel project and had to pay off the construction loan. Since it didn't have an office in Charleston, GE reps flew to Bennett's office.

"From that very first meeting, they stood out," he recalls. "I'd never had a banker come to my office; I'd always gone to theirs. I couldnt believe it—GE, this big company, was coming to see me. I certainly made a note of it." And while oftentimes, banks can seem a little intimidating or standoffish, he says GE was the opposite. "It felt like we were on a more equal playing field and were always interested in my business. From the very beginning, they were helping me build my business instead of just lending me money. To this day, I don't think of GE as a bank. I think of them as a partner who lends me money and helps me build my business."

And while deals like Bennett's might not be the multi-milliondollar transactions GE has become known for lately, the firm puts just as much effort into solving its smaller clients' problems. Case in point, a few years ago Bennett had just completed a hotel and needed to obtain permanent financing to pay out the construction loan. Although it didn't normally lend on unseasoned hospitality properties, GE agreed to take a look at the deal.

Luckily, Bennett had another hotel nearby that was operating well and, incidentally, secured a GE loan. "GE came back and said if that if I were willing to cross-collateralize the two hotels, they'd lend on it," says Bennett. "They took what was a very difficult thing for me—a deal no other lender was willing to look at—and they figured out a solution."

Working with borrowers to get the best out of their assets is a strong suit thanks to GE's asset management team. Led by Joe Manasseri, managing director of global asset management, the team spends a lot of time with borrowers through the entire life of the transaction. "We build a deep relationship with our borrowers from closing through, hopefully, the extension or renewal of the loan," says Begor. "We try to add advice and ideas so that, if they do feel some pressure, we can move quite quickly to help them work through that challenging situation."

That kind of attention to borrowers' needs, along with their certainty of closing, is what GE Capital Real Estate has become known for these days—along with, of course, the kinds of deals it tends to go for. That is, senior mortgage loans, with higher LTVs (70% to 75%), primarily held on its balance sheet, which positions them in the space between where banks, life companies and mezzanine funds typically play. The LTV window also, "gives us some room to not only achieve some margin, but also to have a market niche that's quite attractive," points out Begor.

And don't look for the firm to go after some of the high-profile trophy deals that are making headlines nowadays. "A prime office building in Manhattan is probably not going to be our sweet spot," Burger relates. "We tend to look for a value-creation angle with the particular asset we're lending against, and very often it's going to be in a regional market where the space is not as crowded."

He's quick to point out, however, that the firm is mindful not to push the envelope on risk parameters, either.

Speaking of niches, GE's leaders see ample opportunity in nontraditional real estate sectors. While the bulk of its growth is likely going to come from core office, along with industrial and multifamily, it's also keen on hospitality, manufactured housing and self-storage— areas in which the playing field isn't as crowded. For instance, its manufactured housing program has hit the ground running, closing up to $500 million worth of transactions in that space, with longterm clients such as National Home Communities of Scottsdale.

As stated, all of those efforts have GE Capital Real Estate on track to close out 2012 at between $5 billion and $6 billion in originations. The goal for 2013 is $7 billion to $8 billion. Five years from now, Begor expects the firm to be known primarily as a debt business operating on a global level, though it will still have an equity component.

"We are committed to the lending space; it's a growth market," stresses Begor. "We've got a lot of support from GE to grow the business. Our goal is to be a market leader."