Two New Capital Sources Target SoCal

LOS ANGELES-LaSalle Bank of Chicago has added a new project-based lending office in Glendale and Manhattan-based Meridian Capital Group has kicked off an ambitious Southern California expansion with a new office in Century City as the juggernaut that is Southern California commercial real estate continues to drive demand for financing. The execs heading the new LaSalle and Meridian operations both tell GlobeSt.com that they see significant growth potential not just in the Southland but also in other California and West Coast markets.

The new LaSalle office is headed by SVP Denise Schulz, who most recently was with California National Bank and has also held positions at Bank of America and Wells Fargo. The Meridian office is headed by Gary Bechtel, managing director, who held management or production positions with Johnson Capital, Finova Realty Capital and Pacific Southwest Realty Services before joining Meridian.

LaSalle's Glendale office marks the third business line that the bank now operates from a Southern California location. The company already has an office in Newport Beach that arranges conduit loans and financing for home builders.

Schulz tells GlobeSt.com that the Glendale office is the first LaSalle office in California to specialize in project-specific debt for the middle market. "Our focus will be primarily on privately owned companies, large regional builders and debt that is specific to a particular project," she explains.

LaSalle has financed Southern California projects in the past, typically from its Chicago office, but financing will now be referred to the new Glendale office. The office will finance "virtually all the different product types," Schulz says.

Asked if the bank has a "sweet spot" in terms of its preference for loan size or product type, Schulz answers that it's probably in the range of $20 million to $30 million, but with no particular preference for product type. However, the bank provides financing for a significantly broader range than that, from about $5 million to $160 million. It's even looking at a $250 million deal now at one of its other offices.

Both Schulz and Bechtel cite the need for flexibility in today's commercial real estate lending landscape. "We really try to match the structure of the deal to fit the risks that are unique to the transaction," Schulz says.

Bechtel says that capital sources today need to be "financial architects" to tailor their deals to the varied array of projects and borrowers. He notes that Meridian, a commercial mortgage brokerage and advisory firm, "will provide every part of the capital stack," including equity as well as debt. The company has worked on a number of transactions where it has provided 100% of the total capitalization required in the deal, Bechtel points out.

Meridian arranges virtually every size and type of financing, Bechtel notes. Last year, for example, the company did roughly 3,000 transactions totaling $16.1 billion. Those figures included approximately 1,300 transactions under $5 million and more than 50 transactions of $50 million or more.

Closing that many deals obviously requires a commensurate staff and a system for executing the deals. One of Bechtel's top priorities in the new Century City office is assembling a staff of 30 professionals to handle the approximately $1 billion a year in business that is Meridian's initial goal for its L.A. office.

"About half of those 30 will be origination people, and the rest will be back-office, support-oriented positions," Bechtel says. He adds, "We're in a major hiring mode now" to create that staff.

The Century City office is just the first part of a West Coast push for Meridian. As Bechtel explains, the company's long-range plan calls for building offices up and down the West Coast from San Diego to the Northwest, and to expand into other markets too, such as Arizona, Texas and Colorado.

Despite the formidable amount of financing business on the West Coast, "Other than a few mortgage banking companies, very few East Coast companies have made the jump to the West, and very few West Coast companies have made the jump to the East," Bechtel observes. He describes Meridian as "primarily an East Coast company that has not pushed much farther west than Chicago."

Meridian, which was founded in 1991, has been looking at expanding to the West Coast for a number of years, Bechtel says. But the company waited because it was so involved in growing its business on the East Coast and expanding into some other markets like Florida, Chicago and Maryland.

The new chief of Meridian's expansion efforts here sees a robust commercial real estate industry across the board, with one possible exception. "The only sector that I can see that appears to be cooling is the condo craze, and that's not just the case in California. It's all across the country," Bechtel says.