GlobeSt.com EXCLUSIVE: NorthMarq's Padilla Talks About Takeover

PHILADELPHIA-NorthMarq Capital Inc. and its parent, Marquette Financial Cos., has brought a close to talks that began in 1998 with the buyout of the Philadelphia-based division of Legg Mason Inc. to create the nation’s third largest commercial real estate mortgage financing and servicing business.

The transaction closed mid-afternoon in NorthMarq’s home territory of Minneapolis, with the “west of the Mississippi” mortgage banking giant now gaining an East Coast stronghold. “There’s been an ongoing dialogue,” Edward Padilla, NorthMarq’s CEO explains to GlobeSt.com. “This just wasn’t something out of the blue…This company is a real good peer to us.”

In 1998, Legg Mason made buyout overtures to NorthMarq’s predecessor company, Northland. The talks continued on and off after NorthMarq’s creation with everything from merger to alliance tossed onto the table. About a year ago, the prospect was renewed, but it was NorthMarq doing the courting.

NorthMarq gains access to new cities with no overlapping offices and a footprint in practically every major US market, stresses Padilla, who will lead the Minneapolis-based organization but relinquish the presidency. NorthMarq’s 11-office network now consists of 28 offices coast to coast, 400 employees and more than $6.5 billion in annual commercial real estate financing of debt and equity transactions and a primary commercial servicing portfolio in excess of $21 billion.

The transaction includes only the mortgage banking, real estate consulting and servicing division of Legg Mason Real Estate Services Inc. (LMRES) The Baltimore-based Legg Mason and LMRES will retain the real estate investment advisory business for pension funds and other institutional and private investors. Legg Mason is a holding company that provides asset management, securities brokerage, investment banking and related financial services.

As the NorthMarq flag is planted on the East Coast, the Legg Mason offices will remain intact although efficiencies will be explored in loan administration over the next 24 months. Padilla says a hard look will be given to the servicing locations, which is Miami for Legg Mason and Minneapolis for NorthMarq.

Walt D’Alessio, chairman and CEO of LMRES, will become vice chairman of NorthMarq and take a seat on its board of directors. He also will continue to serve as the LMRES non-executive chairman. LMRES president Craig Butchenhart will become NorthMarq’s president and report to Padilla. Butchenhart will be responsible for eastern operations and coordinate national production efforts.

“We’ve worked cooperatively with the NorthMarq team for more than 20 years on a variety of transactions, so we know each other well,” Butchenhart said, noting the company has passed the torch to an organization with a similar culture and client-servicing philosophy.

Legg Mason expects to record a pre-tax gain of about $11 million. The transaction carries a September completion, subject to customary closing conditions.