Real estate firm Marcus & Millichap, with offices across the U.S. and Canada, is expanding its finance coverage with the acquisition of Dallas-based Metropolitan Capital Advisors. Founded about 30 years ago, MCA is a real estate finance intermediary specializing in arranging debt and equity for commercial real estate on behalf of developers, investors, and owners.
As part of the deal, which closed last month, the MCA name will go away, and the company will be absorbed into Marcus & Millichap Capital Corp., a wholly-owned subsidiary of Marcus & Millichap.
MCA founder Scott Lynn has stepped aside as chairman to pursue entrepreneurial endeavors in the commercial real estate industry. “Given the present situation that is affecting the world, I believe there will be once-in-a-lifetime opportunities, and I want to use my 30 years of experience in leveraging historical market cycles to pursue those prospects,” he said in a statement.
D CEO spoke with Tim Speck, senior vice president, along with MCA executives Sunny Sajnani and Todd McNeill, to learn more about how the deal came together.
Speck, who oversees both Texas and Oklahoma markets, said Marcus & Millichap’s capital markets group had been identified by national leadership as a key growth opportunity for the company. “When we got to know Sunny and Todd and the group at Metropolitan Capital, it became very clear that a one plus one equals four as we looked at our respective businesses,” Speck said. “We both have a large presence in the private capital/private clients space.
“And that market is so huge. When you look at the amount of business that we’ve done as a firm in the private client space–in Texas, more particularly—we’ll do over 500 transactions in the state. The Dallas office is one of our largest offices within the firm, both in terms of real estate transactions and debt financing,” Speck said. “Having that line up with another group like Metropolitan Capital Advisors … we looked at our client base, and we look at who isn’t doing business with us. Although there is some overlap, there’s not very much overlap, and so we saw a great opportunity for those two to come together.”
There are great complements between the two firms’ product type areas of expertise, Speck said. “We do a lot of sales for developers in the multifamily space with groups like our Institutional Property Advisors; our advisory group here in Dallas-Fort Worth is one of the largest in the country. And we do a lot of transactions for the merchant developers and apartment developers. Sunny and Todd have done a lot of work ground-up development. We see a great opportunity to combine what they do in terms of placing debt, equity, and other structured finance tools available, especially when the market is like this, really lines up well with being able to provide some other debt opportunities for our IPA group.”
Sajnani said integrating Metropolitan’s extensive lender relationships, wide product offering, and broad client base will contribute to MMCC’s growth plans. With MMCC already having a financial arm, he said it made sense to expand and bolster it in Dallas-Fort Worth. “There was a natural fit for us within the organization.”
For a long time, Metropolitan’s hallmark has been to find and secure the most cost-effective capital structure regardless of transaction size or complexity. McNeill said aligning with MMCC was a “very positive movement.”
“We had a very long track record of repeat clients and a transaction base that follow us where we go and what we do, and so for us, it was a very natural fit to bolt on to the Marcus & Millichap platform, which has expansive investment sales capabilities,” said McNeill, who was with MCA for 23 years. “We just focused on debt and equity placements for commercial real estate, so for us to come together with a prolific investment sales platform like Marcus was a no brainer. It allowed us to take our existing client base, bring them into the fold, and then be able to serve all of Marcus clients’ for their debt and equity needs.”
With Marcus & Millichap’s strong multifamily platform, both Sajnani and McNeill say they look forward to expanding services in the sector.
“There are going to be some growth opportunities in the capital placement market there, but also something that we have done historically that we want to bring to the table is development capital and development capital raising,” Sajnani said. “Marcus & Millichap has a very strong investment sales platform and typically sells improved properties. Those same clients are also developing and historically have not leveraged into the brand to raise development capital, and that’s where we think there’s a huge opportunity for us to bring our expertise to the table.”
But it won’t be limited to just apartment assets. “It could be anything from a retail shopping center to an office building to an industrial complex to hotel and healthcare facilities to land development; you name it, we have in our specialty across all product types.”
What is especially interesting about the deal is that it all went down during the COVID-19 shutdown.
“This was a dialogue and a transaction that started eight to nine months ago,” Speck said. “We went ahead and as a firm and closed on the transaction with no change to the terms as a result of the severe economic conditions that we even foresaw coming. And that’s because again we see a great synergy. As we got to know Sunny and Todd even more, and they got to know us, we left our deal in place because we are banking on the people. And we felt strongly about the relationship that we formed and the future opportunity.
“Both parties could have easily tried to change the terms of the deal given where we were, but it was the right time for both firms.”
