Mortgage broker Max B. Mellman is taking aim at the outdated lending market. He is launching Max Benjamin Partners, described as “an employee centric real estate advisory firm,” to disrupt the current lending market. Namely, he believes the industry needs to evolve with technology and commissions structures for originators. The new firm will give originators the opportunity to earn a 100% commission split and ownership in the company. The model, Mellman says, will allow the firm to outperform current mortgage companies.
“We currently have a platform of over 40,000 private investors, pension funds, sovereign wealth funds, PE firms, etc. and are in the process of building a system that will allow us to outperform a majority of the current brokerage firms on the market in regards to preferred/JV equity placement and construction financing,” Mellman, managing director at the new firm, tells GlobeSt.com. “We are structured in a way that allows our originators to earn a majority of their commission and is solely based on performance and value. Max Benjamin Partners is very entrepreneurial and has a holistic and meticulous approach to real estate finance and the capital stack. Every hire has the opportunity to invest their commissions on the GP level for consistent cash flow.”
The big value here is in the 100% commission structure, and this is Mellman's strategy to disrupt and change the industry, which he describes as “archaic.” “There is clear benefit for originators on the 100% commission structure. Like our clients, and our financing sources, we truly value our originators—thus the reasoning behind a 100% commission split,” says Mellman. “The structure has certain caveats but the model is sustainable and geared towards substantial growth. We hold ourselves to exceptionally high standards, and that split is only achievable after certain hurdles have been hit.”
Mellman says that this is an ideal time to launch the firm, because we are so late in the current cycle. As conventional lenders take a more conservative approach, it will create opportunity for new players. “As we move towards the end of the cycle, we believe that conventional lending sources are going to be more and more conservative,” he say. “This will create a greater demand for alternative financing sources. Our heavy focus on technology allows for greater access to these alternative and unconventional lending sources, which will in turn allow us to outperform a majority of our competitors.”
That change is already starting. This year, construction-financing options have tightened. “The biggest change that we've seen this past year is the pull back in construction financing. Conventional sources are much more selective than they were a year ago,” Mellman explains. “Due to rising interest rates, rising costs of construction and the current position of our economy, conventional lenders are clearly proceeding with caution.”
There are other signs as well that conventional lenders are becoming more conservative. “We're seeing lower leverage on non-recourse transactions and banks are incorporating partial recourse/personal guarantees to mitigate risk. Caution from conventional lending sources has opened up the doors to a select group of private debt funds and high net worth individuals that are still quite active in today's market,” says Mellman. “Max Benjamin Partners can still confidently get up to 80%-85% non-recourse construction financing on all asset classes, in a majority of markets at all-in rates of 7.5%-8% with strong sponsorship.”
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Kelsi Maree Borland
