One man, two hats

Real Estate Weekly, Dec 18, 2002 by Denise Mann

John Estreich starts each day by making a list of the principals, bankers and brokers he will be speaking to during the day. In neat cursive, his list fills three legal-sized pages and includes all the players involved in all of his deals -- from principals and bankers to engineers and brokers; all to make sure that his deals are flowing smoothly.

"Each day, I review every deal. Some are easy, while other deals you have to discuss more to see what the hold-ups are and whether they are in approval or funding status," he says.

With dozens of deals pending at any given time, Estreich is a busy man -- on most days getting into the office by 7:30 a.m. and not getting home before 9 p.m. The time in between is filled with countless meetings that range geographically from Manhattan to the windy streets of Chicago.

Aside from being the founder and partner of Estreich and Company, a leading commercial mortgage brokerage firm servicing the entire country, Estreich partnered with long-term colleagues and friends Jeffrey Feil and Jay Anderson of the Feil Organization and Morton Olshan of Mall properties in 1999 to create Longview Funding, a mezzanine opportunity fund.

Estreich is uniquely suited to wear both the brokerage and direct lending hats. After spending close to a decade in banking, he started his mortgage brokerage company with close friend Patrick McDonnell in 1988. Estreich & Company has been in business for almost 16 years and has been involved in some of the largest transactions in New York City -- from 1251 Avenue of the Americas to the Empire State Building. At any given time the company is involved in dozens of transactions -- some 30% or greater are outside of the tri-state area.

So what do you get when you mix a well-established and respected mortgage broker a real estate finance executive with 25 years of operations and finance experience (Jay Anderson) and a young and aggressive former real estate attorney who runs the real estate investment arm of a $4 billion plus asset management fund (Michael Boxer)? You get RCG Longview L.P.

The fund is a joint venture between Longview Funding and Ramius Capital Group, which raised $124 million May 2001. Since inception this well-balanced team has "closed over $400 million of deals--almost completely investing RCG Longview fund number one and allowing limited partners and other funds to share in the other $300 million or so, in properties including the Herald Square Center, Park West village, 175 West Jackson in Chicago and the Queens Atrium, just to name a few," Estreich tells Real Estate Weekly.

"Our third fund, (RCG Longview two) which we expect to close in the Q1 or Q2 of 2003, should be $150 million or perhaps even greater," he says.

Estreich's foray in to direct lending first started in 1999, when he, Jeffrey Feil (CEO of the Feil Organization) and Jay Anderson (COO of the Feil Organization) raised $34 million in their first opportunity fund, which invested in an array of bridge, mezzanine, preferred equity and construction loans.

In 2001, after the team had fully invested their first fund, they joined forces with Ramius Capital Group's Michael Boxer, and started RCG Longview.

"We believed that opportunities in the mezzanine business for us are growing, so we set the second fund 3.5 times larger than the first, at $124 million," says Estreich, who is extremely modest despite his success.

The secret to their success? Teamwork, Estreich says.

"There is no way that I could do both without the partnerships that I have without Patrick on the mortgage side and Jay and Michael on the direct Lending side I could not be effective at either, by doing both," he says.

"Because I am in the mortgage business, a number of contacts come through me," he says, explaining the lay-to-day. "Michael and Jay run large real estate businesses and have an innate sense of value and knowledge of real estate--which is indispensable in getting the right deals done," he says.

Jay Anderson, principal of RCG Longview, LP & COO of the Feil Organization agrees: "Our team has a great dynamic," he says. "We complement each other and are able to make consensus decisions quickly and efficiently."

According to some in the real estate world, mezzanine lending is a $10 billion business. RCG Longview is betting on the segment of borrowers who favor the experience and judgment of their lenders. Differentiating smart money lenders from the rest of the hard money and family opportunity funds operating in the U.S. today is key

As Anderson says, "Our ability to operate successfully is not because we are 'smarter' than the competition, it is just that the partners combined operational and ownership experience (north of 35 million SF in all asset classes) combined with the ability to be patient in down cycles, gives us the edge over purely financial players who would need to bring these skills in house after a problem occurred," says Anderson.

While, "we like to stay in the tri-state area, we do have significant investments in Chicago, Boston, Sacramento and Houston," Estreich says, adding "we are an opportunity fund so theoretically we go where there are opportunities."