| FEATURE ARTICLE, MAY 2005
A DEVELOPER’S LENDER
Dallas-based Metropolitan Capital focuses on representing the borrower, not the lender, when finding financing.
Randall Shearin
Ever met a financial intermediary that represents the developer instead of the lender or capital side of the business? Metropolitan Capital Advisors (MCA) wants to change the perspective of mortgage brokers by representing developers and owners instead of financial institutions. And it has; last year the company closed 82 transactions with 47 different sources of capital.
Texas Real Estate Business recently spoke with Scott Lynn, director and principal of Dallas-based Metropolitan Capital, to get a feel for the company’s different approach to the real estate finance business.
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Metropolitan Capital Advisors completed both acquisition and permanent financing for Plaza Bank Center, a 100,000-square-foot specialty retail center in Dallas, where the sponsorship was able to retrieve all of its original equity investment after the property had been renovated and re-leased.
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Lynn has been in the finance intermediary business for more than 20 years. In the mid-1980s, he worked for an affiliate of Grubb & Ellis in Dallas that arranged loans on behalf of a variety of regional and national capital sources. In the late ‘80s, when the Texas real estate depression hit and the S&L crisis began, things went south for lending in Texas. Every national lender red-lined the Texas market. Lynn, though, was Dallas born and bred, and decided to stay. In 1986, he was on a Southwest Airlines flight and saw the cocktail napkin that had every destination of the airline. He pulled out a pen and circled all the cities outside Texas. Over the next few months, Southwest’s jets became a second home for Lynn as he traveled to cities like Nashville, Kansas City, Jacksonville and Birmingham, where he found new real estate developers and owners to arrange financing for. From mid-1986 to late 1989, Lynn says, he did not do any business in Texas, even though he was based in Dallas.
“There simply weren’t any lenders willing to lend in Texas,” he says.
In 1989, Lynn began arranging financing for apartment deals in Houston, after the capital markets began to recover. But after the recovery, Lynn notes, the business had changed a lot. Due diligence and paper requirements had increased ten-fold. Lynn created a concept to establish an intermediary firm that was focused exclusively on working as a download finance department for developers, investors, buyers and sellers of real estate. He did not represent the capital side of the business, as most intermediary firms do.
Lynn formed Metropolitan Capital Advisors in 1992 with that philosophy. The company has followed that philosophy for the last 13 years and has done more than $3 billion in financial transactions in more than 450 assignments. The vast majority of the product type that MCA finds deals for is in the retail sector.
“About 70 percent of our transactions are land acquisition loans, development loans, construction loans and equity placements for retail,” says Lynn.
The company also finds financing for apartments, condominiums, office buildings and other property types. The company exclusively represents some of Dallas’ most astute retail developers, like Weber & Company, Shafer Property Company, Today Realty Advisors, Margaux Development, Uptown Enterprises, Falcon Realty and many other entrepreneurial retail developers. The company has a substantial base of repeat customers, a goal that Metropolitan Capital strives for.
“Money is a commodity,” says Lynn. “The only way to differentiate yourself is through service. Our clients repeatedly come back to us for all their finance needs because they like the idea that we represent their interests. We are a punching bag between the developer and the capital provider and last, we have an in-house processing and closing department that works carefully with the capital source and the client.”
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Metropolitan Capital Advisors placed more than $50 million of construction debt and equity financing to develop the 500,000-square-foot Portofino Shopping Center located in The Woodlands, Texas.
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Having such a large closing department is not necessarily an inexpensive proposition. Lynn feels that, again, the service this gives the clients — the speed that the deals can get done — warrants the cost of the operation. The staff at MCA has a particular culture that is hard-working and process-focused. Most of the company’s associates have a few years’ experience before they join the firm. When they join, they work side-by-side with Lynn for several years before initiating their own deals. Over half of the company’s senior leaders have gone through that program. Lynn finds that personally training and grooming new brokers is the best way to initiate them into the company’s culture and service philosophy.
MCA has six senior directors, including Lynn, and a support staff of eight. The company closed $480 million in 2004. Working with the different sources of capital poses a challenge; instead of having a relationship with four or five lenders, MCA must have relationships with many sources. From regional lenders like TexasBank to large Wall Street firms like J.P. Morgan, Lehman Brothers, Bear Stearns and Wachovia, MCA wants to be able to find the right capital source for the right client for the right deal. The firm also provides its clients with equity capital and other high leverage structured finance products.
During the first quarter of 2005, the company closed over $125 million in 26 transactions with 19 different sources of capital.
“We’re very wide on our market coverage. We don’t have any affiliation, allegiance or alliance with any specific source of capital,” says Lynn. “We’re constantly making a market for each assignment.”
MCA isn’t limited to deals just in Texas. Just as Lynn started his business, he has kept growing it beyond state lines. Over the last 24 months, the company has worked on deals from Northern California to Jacksonville, Florida.
“The divergence of our clients and their transactions are getting much more widespread,” says Lynn.
In 2005, the company predicts that it will close $560 million to $600 million in deals. The company’s growth forecast calls for it to increase its volume, not the size of the company.
“We don’t want to get too big for our britches,” says Lynn. “We want to have clients come back to us because we differentiate ourselves by service. In my opinion, the bigger you get, the harder it is to deliver high quality service.”
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this article contact Barbara
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