On the whole, banks aren’t doing much in the way of net hiring now – it’s more a question of one-in-one-out as they try to keep their costs down. However, one business area is bucking the trend: real estate banking is hot. Some banks and funds are actually building real estate teams.
“We’re busy,” said Timothy Rowe, managing director of Cobalt Recruitment, a real estate specialist. “We’re doing a lot of recruitment, both for residential lenders and for some of the private equity funds.”
BNP Paribas said it is hiring 50 people for its real estate team in the UK. Wells Fargo has said that it wants to expand its UK property lending business. Citigroup, Morgan Stanley and Bank of America are also said to be pushing their presence in European property lending.
It’s not all crazy hiring in real estate, however. The co-heads of Carlyle’s real estate funds left recently following alleged ‘serious difficulties’ with the fund’s European investments. Rowe said recruitment is, “selective,” and that everyone wants to hire the same kind of people. “They want analysts – banks and funds are analyzing things to death before they make any kind of investment decisions. They also want people with experience. Given the lack of activity in the real estate market recently, this typically means people who’ve worked in the industry for more than 15 years,” Rowe added.
Mortgage Backed Securitization (MBS) jobs: Back soon?
While some banks and funds are busy building real estate investment teams, hiring of the securitization professionals who package up real estate loans and sell them on as bonds is mostly still dead.
Securitized debt issuance fell off a cliff in 2008 and has yet to climb back up it again. This is especially the case in Europe. According to data provider Dealogic, there has been no registered issuance of securitized debt in Europe so far this year. By comparison, back in 2007 $19.3bn of securitized debt had been issued in Europe by late April. The situation is better in North America: year to date American securitized debt issuance stands at $26bn according to Dealogic – up from $11bn in 2011, but still down from the $97bn that was issued in the first four months of 2007.
Unsurprisingly, Rowe said there’s very little securitization hiring in London right now. In the US, however, there are some signs that commercial mortgage backed securitization (CMBS) hiring is making a tentative comeback: Todd Hirsch, the former head of Credit Suisse’s European finance group, recently joined Arbor Commercial mortgage as head of CMBS finance and distribution; Kroll recently hired four US analysts from Morningstar for its CMBS ratings group.
Charles Roberts, a London-based partner in the real estate team at law firm Paul Hastings, said the US CMBS market was always a lot more developed than the European market, and that it has therefore recovered more quickly from the downturn. US banks will lead the CMBS resurgence in Europe, he predicts. “Until now, US banks have been primarily focused on the US commercial mortgage backed market. Now they’re concerned that they’ve over-extending themselves in the US and are starting to look at expanding in Europe – hiring will follow from that,” Roberts predicted.
Mark Nichol, a research analyst at Bank of America Merrill Lynch Global Research, agreed that the stage is set for some CMBS jobs to return in Europe. “The availability of financing for commercial property has declined and loan margins have increased since the financial crisis began…This has opened the door for new lenders to emerge and CMBS to return,” he wrote in a recent report.
However, Robert said the European CMBS market won’t truly recover until the eurozone crisis has been resolved. “There are so many issues and uncertainties in the European capital market, that it’s very hard to put a CMBS deal together right now. How can you put a bond together if you have originate the loan three to six months before you go to market and you don’t know what the market will be like then?”
Robin Priest, a managing director of Alvarez & Marsal’s real-estate business in London, said people underestimate quite how much of a mess the European real estate market is still in. “A lot of the fundamental issues in the European commercial real estate market haven’t been dealt with. A lot of loans have simply been extended and pretended and will eventually hit the buffers.”
Priest said his team is hiring, “selectively and opportunistically.” He’s not looking for securitization bankers or loan originators, however, but for people to restructure existing loans: “When the market comes back, we will turn to help people take advantage of new opportunities,” he said. “For the moment, a lot of the difficult stuff still needs to be done.”