Chicago Mortgage Banker NorthPoint Capital Leverages Strengths to Enhance Market Penetration
When CEO Keith Volgman made the decision a year ago to expand his loan origination business, NorthPoint Capital, the Chicago-based mortgage banking operation began the search for the ideal candidate to spearhead that effort.
Volgman’s objective was to leverage NorthPoint Capital’s highly competitive, long-term correspondent lending relationships to benefit a larger number of Midwest property owners.
Charles Krawitz, who has more than 25 years of experience in commercial real estate finance, turned out to be the perfect fit. After all, Krawitz had a proven track record of boosting deal volume based on jobs he previously held at KeyBank, LaSalle Bank and elsewhere. Last May, Krawitz officially became COO of a new entity, NorthPoint Capital Funding.
Operating from the company’s office in downtown Chicago, Krawitz oversees the expansion and training of the loan origination staff. His charge is to grow the scope and scale of the firm’s lending relationships across the commercial and
While there is no shortage of lenders
chasing product in today’s market, money doesn’t flow evenly, observes Krawitz. “It doesn’t necessarily flow into neighborhood assets the way it flows into the institutional space. It doesn’t flow into the rural markets the way it flows into the urban markets. I’ve added value by working where money doesn’t always flow so evenly.”
Although banks are the primary source of capital for commercial real estate, they prefer not to hold a loan for more than five years. “If someone has a $5 million asset and they want a 10-, 15- or 20-year maturity to their loan and they want their interest rate to be fixed, we’re well-positioned to help them by way of one of our life company correspondent relationships, or other sources of capital.”
NorthPoint Capital Funding is part of NorthPoint Capital, which specializes in making loans for, and making loans to, commercial real estate owners. NorthPoint Capital also services those loans for its correspondent lenders and for its own account.
Since its formation in 1998, NorthPoint Capital has built a sizable servicing portfolio. The company has offices in Chicago, Detroit and Cleveland. Volgman has been active in commercial real estate finance for 30 years.
Krawitz and Volgman have known each other for at least 15 years. A picture on the office wall shows the two skiing together in 2001. In the lending business, the two share a similar philosophy: The mortgage banker is a trusted advisor. And because mortgage bankers service the loans they arrange, the marketplace values them more highly than mortgage brokers.
Let’s Make a Deal
Although it secures financing for borrowers across all the major property sectors, NorthPoint Capital Funding prefers multi-tenant properties such as apartment communities, office and flex properties, and strip shopping centers. “The less reliant a property is on any given tenant, the better,” says Krawitz.
In late 2015, NorthPoint Capital Funding arranged the refinancing of two retail centers in northeast Illinois for $2.9 million. New Lenox Town Center in New Lenox, Ill., and Orchard Crossing in Montgomery, Ill., are multi-tenant retail centers that are outlots to Walmart stores. The properties were constructed in 2014 and 2006, respectively, and contain a combined 15,485 square feet.
The lender, Southern Farm Bureau Life Insurance Co., provided an 18-year, fixed-rate loan at about 4 percent. “The repeat borrower was able to opportunistically lock in its interest rate four months in advance of funding so as to let the prepayment penalty on its existing loan burn off,” says Krawitz.
This February, NorthPoint Capital Funding secured $4 million in refinancing for the owner of a 48,000-square-foot industrial property in Rockville, Md. The borrower was facing an imminent CMBS loan maturity and opted for a 20-year, fixed-rate fully amortizing loan provided by Southern Farm Bureau.
Although the interest rate wasn’t disclosed, Krawitz says it was the best rate available in the marketplace. Known as Southlawn Industrial, the multi-tenant industrial property was constructed in 2001 and features 22-foot clear heights throughout.
In December 2015, NorthPoint Capital Funding arranged a $5.75 million, two-year, interest-only refinancing for the owner of Indy Town East, a 410-unit multifamily property in Indianapolis. The borrower was in the process of refurbishing the property and needed funds to complete the renovation.
NorthPoint Capital Funding came to the rescue after the borrower’s attempt to secure financing through a different intermediary failed. The lender, Bixby Bridge Capital, realized the property’s income potential and the commitment of ownership to complete the repositioning, explains Krawitz.
Once the renovation of Indy Town East is completed by the middle of 2017 and the property is fully stabilized, NorthPoint Capital Funding will help the borrower secure a permanent loan.
“Ultimately, I think this transaction gets a permanent loan through us by way of HUD,” says Krawitz. In addition to its correspondent relationships with various life companies, NorthPoint Capital is an approved Multifamily Accelerated Processing (MAP) lender, which means it has been authorized by HUD to originate, underwrite and close FHA-insured loans through HUD.
The transaction serves as a prime example of Krawitz’s connectivity in the financing space. His contact at Bixby Bridge Capital is a former colleague from his LaSalle Bank days. “I was well-positioned, and maybe even uniquely positioned, to know which lender would offer an attractive loan on this property.”
“I do feel a sense of personal satisfaction when we’re able to help people secure the type of financing that is appropriate for their needs, wants and desires and will keep them out of potential trouble down the road,” says Krawitz.
These three deals fit NorthPoint Capital Funding’s sweet spot. “My background has always been in what the marketplace would consider bread-and-butter commercial real estate financing,” he points out.
Krawitz anticipates the average deal size for the new NorthPoint Capital Funding unit will range from $4 million to $6 million during the first year. By comparison, the average deal size for the rest of the NorthPoint Capital organization has been $10 million over the last five years.
The organization has the capacity to do even bigger deals, according to Krawitz. “Do we have the resources and correspondent relationships to do the $20 million, $50 million and $100 million deals? As a correspondent for mega life insurance companies like AIG and Voya, we certainly do.”
Although NorthPoint Capital Funding was launched 10 months ago, it didn’t start closing transactions until the latter half of 2015. “Deals don’t happen overnight,” says Krawitz. “Our pipeline is strong and growing, which is great.”
In terms of production, Krawitz is confident the new team will originate $100 million in loans this year, making a meaningful contribution to NorthPoint Capital’s company-wide production. The deals in the pipeline run the gamut, from life company financings to bridge loans to CMBS.
His biggest challenge is hiring the right people amid a tight labor market. The U.S. unemployment rate in January was 4.9 percent. “The challenge is finding the person who is entrepreneurially inclined, who has a good command of finance and who understands the commercial real estate marketplace,” says Krawitz.
NorthPoint Capital Funding is currently a seven-member team led by Krawitz. Since joining the firm last May, Krawitz has hired five people, including four loan originators and one analyst. He’d like to add three to five more originators and another analyst.
As part of the growth strategy, the originations team is attending more industry events and networking with the commercial real estate community to get the word out that NorthPoint Capital has a history of performance and connectivity to lesser-known capital sources.
The biggest opportunity for the fledgling company, Krawitz believes, is to parlay its successes into reaching additional property owners and garnering a more consistent flow of transactions, which could put the company on the radar screen of even more capital sources.
One advantage of working in a relatively small mortgage banking firm is the ability to develop a deep relationship with lenders. “We really know what these lenders want to target and why,” he says.
That understanding helps NorthPoint Capital Funding avoid chasing deals that hit a dead end because they don’t fit a particular lender’s parameters. “Sometimes larger [mortgage banking] shops tend to have almost too many correspondent relationships, too many representations,” explains Krawitz. “They don’t do enough deals with an individual lender to develop that same type of intimacy.”
The relationship a mortgage banker has with lending sources is its lifeblood, so Krawitz says his team can never be indifferent or casual in its approach to transactions. “If we bring a life company a loan and that loan defaults, it puts our relationship in jeopardy, and we would never want to do that. We take our responsibilities very seriously.”
Krawitz, who earned a bachelor’s degree in finance from the University of Illinois in 1987 and later a master’s degree in regional and urban planning from the London School of Economics, embraces his role as mentor.
If a younger member of the team is frustrated because he can’t get a return phone call from a prospective client, Krawitz will make the call himself with the teammate by his side.
“I’m able to pick up the phone and get through the gatekeeper, get the person on the line and get them engaged in a meaningful conversation. I just love that mentoring aspect of the job.”