RE Debt: Brokered vs Direct

For those of you that work on the debt side (debt funds, commercial banking, credit HFs), what percentage of your flow comes direct from sponsor vs are brokered processes? At mine it's about 80% brokered (from JLL/CB/eastdil) and 20% direct to sponsor. Curious what the ratio is for others.

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Oct 4, 2021 - 5:27pm

We are closer to 50/50, but in my experience it generally has more to do with sponsor size that anything else.

Most of our brokered deals are from small to medium sized borrowers that need/want help running a process where the large institutional shops have dedicated financing staff in house and go direct.

Also, some borrowers start brokered but end up direct on repeat deals. We had a borrower that we did 10 deals in 2 years. The first was brokered and they liked us so much they came direct for the rest. If you can avoid paying a broker 35bps and instead call a lender, dupe some docs and close in 25 days, that is generally the easier route.

Oct 4, 2021 - 6:30pm

I'll add about duping docs. It was eye opening for me to see how much business was won (and lost) over duplicating documents. Many lenders out there will do what they need to (drop rate, change structure, etc.) in order to win a deal and get a first set of documents negotiated with a high volume acquisition borrower. They understand that having those docs in place make them so much more competitive to win the next loan that comes around because all of a sudden, it's cheaper and easier to close the deal. 

  • Investment Analyst in RE - Comm
Oct 5, 2021 - 1:41pm

mrcheese321

We are closer to 50/50, but in my experience it generally has more to do with sponsor size that anything else.

Most of our brokered deals are from small to medium sized borrowers that need/want help running a process where the large institutional shops have dedicated financing staff in house and go direct.

I've found this to be the case, but for the truly large loans (say $200mm+), more often than not they're brokered. I've seen BX and their ilk who have a fairly built out capital markets team still engage eastdil / HFF / etc

Oct 4, 2021 - 6:23pm

When I was at a Life Co and did lending probably 90% of our deal flow, maybe even a bit more, was brokered. But many of the larger firms would come to us direct. At a certain scale, as also noted above, firms begin to bring debt capital markets in house. The smaller and midsize players would usually use a broker and the larger shops had one person (or even a team) dedicated just to DCM work. 

Oct 4, 2021 - 9:09pm

Do you have to use a broker again once you have relationship with lender from original brokered deal? Ex: if a mortgage broker introduced me to a bank do I need to go back to the mortgage broker for next deal?

  • Investment Analyst in RE - Comm
Oct 5, 2021 - 11:00am

For those of you that do a lot of direct deals, how did you or your firm establish those relationships? Curious which channels have been the most fruitful (conferences, school networks, etc)

  • Associate 1 in RE - Comm
Oct 5, 2021 - 3:03pm

Debt brokers hate this one simple trick! Google the fund/mREIT and they almost always have originators emails/"get in touch with us" email drops. I would say I have gotten responses from these "cold" emails/reach outs 95% of the time…boom, direct relationship started.

  • Associate 1 in RE - Comm
Oct 5, 2021 - 10:10pm

This is simple but has always made a noticeable difference to my team - take the 15-20 minutes to ask about the firm and their teams experience as well as really telling the group about yourself and your firm. It's amazing how so many people will just want to jump right into the "deal" and not even want to get to know the person they are talking to. My team would take a term sheet a few bps stiffer than another if it meant getting to deal with someone that actually gives a damn.

  • Analyst 2 in RE - Comm
Oct 5, 2021 - 9:52pm

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