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Newport Beach, CA-based Buchanan Street Partners is on the march. The middle-market investment bank recently closed the books on a $600-million first quarter and has its sights set on a personal-best record of $3 billion worth of deals for the year. While the numbers ratchet up, president and CEO Robert Brunswick tells GlobeSt.com that the firm is also in the midst of a national push, which also took major strides in Q1 with the addition of Chicago and Atlanta offices. That brings the tally to five offices, and Northeast and Southwest outposts are anticipated for the coming months. As if that weren’t enough to keep Brunswick and company busy, the firm–which is making its mark in debt and structured finance and investment sales; principal investing (the bulk of which is value-added); investment management; and self-storage plays–has added core-plus investments to its mix. It’s going to be an interesting year for the folks of Buchanan Street Partners, as Brunswick explains:

GlobeSt.com: Let’s start with the physical part of your growth. How do you plan to continue the national rollout?

Brunswick: Given the real estate market and where we see it moving, there’s a call for further diversification as we expand our platform. Most recently–in January–we opened Chicago, which is focused on the principal side of our platform. About 60 days ago we opened an office in Atlanta, which focuses on our self-storage business. The plan is to lead our expansion through particular business lines.

GlobeSt.com: Beyond those, how large can you grow your network?

Brunswick: Prior experience has taught us that multiple offices–in excess of 15 or 20–can get difficult to manage and maintain a culture. So we’ll probably see something in the Northeast and possibly Dallas. My guess is that we would move to the Northeast first. In terms of timing, I could see that office opening up by the end of the year. As we look out over the next five years, a seven-office network should satisfy our plans to serve our investor and developer clients, our employees and our shareholders.

GlobeSt.com: You’re rolling out by discipline. How do you get full coverage of services?

Brunswick: Our platform, given its diversified business lines, enables us to lead this expansion through individual business. So in Atlanta, self-storage kicks it off and gives us a beachhead. Then we’ll build around that the other business lines, such as the principal-investment business. In Chicago, where we just opened our principal business, we’ll expand there shortly with self-storage.

GlobeSt.com: You had a terrific Q1. How do the product lines stand to do through the rest of the year?

Brunswick: We project to be doing approximately $3 billion total. Breaking out the different disciplines, debt and structured finance will do about $1.5 billion, investment sales will do about $400 million, self-storage will also do about $400 million, and the principal activity will do $750 million.

GlobeSt.com: You’ve got some serious competition out there. How do you set yourself apart?

Brunswick: Everyone has their marketing differentiation. Ours is the diversified platform.

GlobeSt.com: Can’t everyone claim that to an extent?

Brunswick: Not in most mid-market organizations. People are experts in the intermediary or principal side because they take different disciplines and capital commitments. They have different employee bases. We’ve been clear on our belief in this as a competitive platform for the benefit of investors and developers.

GlobeSt.com: What will core-plus investments do for you?

Brunswick: It will supplement our value-added business, allowing us to provide an additional product to our investor/developer/owner clients. If you look at the spectrum of real estate investing and the risk/return profile, core-plus investing is one step removed from added value. A number of our investors have said they’d like to see us expand our product line. So this is a modest response and a modest amount of money. We’ve raised a $100-million fund. Coupled with $200 million in leverage, that will enable us to buy $300 million in assets. It’s almost an R&D department for us as we expand our principal platform.

GlobeSt.com: You have stated that few investment managers have your access to an internal source of financing. You’ve also said that few advisors have your access to capital. Where’s it all coming from?

Brunswick: Let me answer the second one first. These are fully discretionary funds that we co-invest through our company, our employees and our shareholders. The capital comes from high net-worth families, money-management firms, plan sponsors, foundations, endowments and corporate investors. So it’s a myriad of investors that we use in either commingled-fund or separate-account formats.

Concerning the access to deals, everyone in this market is clamoring for deal flow because the market is overheated with capital. In that scenario, certainty of close is most important to our client base. As we’ve built our principal business, we’ve been able to develop deal flow either through our agency business. In our model, we hope to have sourced 25% to 40% of our principal business through relationships established in debt and structured finance or investment sales.

GlobeSt.com: What’s your hit rate?

Brunswick: We look at billions in investment opportunities each year that get vetted out very early in the process. We’ve been able to compete very effectively because of our flat organization and our ability to expedite due diligence and review a transaction to its completion. We try to ferret out in the early process motivations and what needs to happen. Then we put our SWAT team in place and move very quickly.

GlobeSt.com: But numbers?

Brunswick: Once we go under a letter of interest we have a 95% hit rate.

GlobeSt.com: The overheated capital you mentioned has got to be a source of worry. No?

Brunswick: No. It actually makes me appreciate that our historic cottage industry has become a conventional asset class within a larger investible marketplace. There has been great maturation, driven by a host of factors–including the public capital markets, transparency of reporting and access to information. But the key driver is a more educated workforce in commercial real estate and the recognition that it’s not a business with a boom-bust mentality. Because of that, we’re all going to have to get more comfortable with lowered yields and what could arguably be less risk in our sector. There is a bit of irrational exuberance and some inappropriate pricing on certain assets, strictly because of the sheer amount of capital that wants to get placed and get placed quickly, but it’s not a bubble. It’s a growing asset class within a larger asset class.

GlobeSt.com: Has real estate become less cyclical?

Brunswick: We’re now part of a larger, worldwide capital market. As such, with the inflow and outflow of capital, our business will be affected as people search for yields. Stocks and bonds have modest yield expectations going forward but I’m comfortable that real estate has changed for the better and with that there will be different pricing going forward. There’s more maturity in the way people look at and hold real estate. To that extent, they’ll recognize that it’s got liquidity and should be kept in the portfolio and not looked at with the trading mentality they may have had in the past.

GlobeSt.com: Is it becoming a commodity?

Brunswick: Debt might be a commodity, but there is still the opportunity to bring efficiency to the equity market. People think the opportunities are gone. Real estate is a $5.4-trillion industry. Probably half of that is non-corporate. Of the non-corporate real estate—half is owned by private developers, owners and operators. It’s still an inefficient space. That’s where the opportunity is.

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