Madison Realty Capital - A Private Commercial Lender

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By Pookkulali Thangavelu
February 4, 2008

New York—Madison Realty Capital, a private commercial real estate lender, similar to a hedge fund, is seeing opportunity in the current environment.

With the recent pullback in the capital markets for commercial mortgage loan securitizations, more borrowers are turning to balance sheet lenders.

The lender said that it originated over $500 million in loans last year, up from over $200 million in 2006, and expects its lending activity to grow 50% for 2008.

"With the subprime contagion now affecting the commercial space, many developers have discovered they need fast and reliable access to short-term bridge loans," said Josh Zegen, managing partner and co-founder of Madison.

"Our strong capital position has allowed us to maintain liquidity in this difficult environment so we can take advantage of the many opportunities that we are seeing."

He added, "Our deal flow has accelerated over the last two quarters, which we anticipate will continue into 2008."

The lender specializes in doing loans ranging from $1 million to $50 million on almost all property types (except assisted living).

Madison is being more cautious in its lending though, requiring more equity input from borrowers and doing lower loan-to-values.

It has been able to pick up a couple of deals which the lenders pulled out because of the market uncertainty. One lender did not want to proceed on an $11.6 million student housing construction deal in Downtown Brooklyn, according to Mr. Zegen, and another transaction required more equity. Madison has increased its staff, adding on two people from Bear Stearns, he said.

Mr. Zegen expects that as Wall Street resorts to layoffs a lack of confidence will hold back investment banks from signing leases. This is likely to result in reduced demand for New York office space and cause prices for office property to go down.

He doesn´t see any huge decreases in rents though.

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