On Thursday, April 21, the UW-Madison Real Estate Club hosted their fifth and final meeting of a successful semester. The club hosted Wells Fargo’s Real Estate Banking group, which consisted of a panel of Conrad Moseley, Norm Olsen, and Betsy Romenesko.
They kicked off the presentation with an overview of the company’s structure, starting at the top with their corporate and investment banking practice. The commercial real estate group sits within this practice and consists of many different products and services tailored to fit clients’ needs – FHA & agency loans, balance sheet lending, CMBS (commercial mortgage backed securities), community lending, and more.
Mr. Moseley then dove into his own specialization: balance sheet lending, or syndication. In this service line, Wells Fargo lends directly to real estate developers, owners, investors, institutions, funds, and REITs to provide for their financing needs. While they largely focus on construction and acquisition financing, they also provide bridge financing, mezzanine loans, permanent financing, and other debt structures. Wells Fargo’s syndication group makes money through service fees and interest, so ensuring the quality of the borrower meet their credit standards is of the utmost importance. Mr. Moseley explained that it can take up to five closed deals to negate one bad loan. Therefore, they conduct rigorous due diligence on the borrowers, their credit, and the tenants leasing the real estate. Does the borrower have commercial real estate expertise? Has Wells Fargo worked with them in the past? Do they have acceptable credit, and have they paid their loans in full and on time in the past? Do the tenants pay their rent in full and on time? Are they manufacturing or selling a product that people want? These are all important questions they ask themselves when deciding whether to move forward with a deal.
After Mr. Moseley gave his part of the presentation, a new analyst provided an overview of what work looks like for her. Betsy explained that analysts play a role in every step of the loan process, from due diligence to closing. They spend time analyzing borrowers’ credit, researching submarkets and real estate trends, and conduct other due diligence to determine whether they should source a prospective deal or not. Betsy emphasized that she gets exposure to all different asset classes, and each deal is very dynamic in its own way.
Norm Olsen followed Betsy’s presentation with a discussion of his specialty: securitization. Mr. Olsen oversees the process of packaging loans together into securities and selling the risk and cash flows of the loans to investors. He explained that CMBS can be a more attractive asset for some investors because the pool of loans diversifies the risk, it offers more liquidity than a typical loan, and still provides cash flow to the owner of the security.