Real Estate Journal — Financial Digest — March 11 - 24, 2016 — 23A
M id A tlantic
F inancial D igest Executive Profile
What do you see this year for your company in 2016? We see a record yea r i n t erms of transaction volume and value. The end of 2015 and the be- ginning of this year has been running at a non-stop, record- setting pace. Monthly transaction volume— just for loans above $15 million, for ex- ample—is double what we averaged
otherwise shock the industry norms. We were the first to cap fees, first at $250,000 in 2014 and when we saw how successful that was, we capped them again last summer at $135,000. And what happened? We had a resounding latter half of the year, especially in December, when others in the industry were report- ing static activity. Finally, as volume soared, we raised our commis- sion structure. It’s the highest in the industry. Top performers escalate to take home 83 percent of a transaction—that’s remarkable. What makes this business challenging? The industry is always changing, that’s what makes it challenging, but also gives us new opportunities. Today, as banks have grown, they are marketing directly to customers. But that’s where our technol- ogy, expertise and use of a streamlined QTS division comes in and underscores why it’s in the client’s best interest to use a firm that has relationships with all the major lenders in the marketplace to get the best terms. The mortgage business used to be just about people and relationships. Now it’s evolved to include data and technology and our firm is merging all those factors. The value for our clients is our brokers are unfettered by any conflicts and are solely focused on getting the best deal using established business relationships and technology. What is the most important life lesson you’ve learned? The only thing we have in this world is a good name. Make sure nothing ruins it. What was your first job in real estate? Mortgage broker. What are your keys to success? God and integrity.
Ira Zlotowitz President Eastern Union Funding Howell, NJ
vast corporate database of lenders—including those who our individual brokers have worked with before— and return to those clients an assortment of the best financing terms available. This frees up the brokers to focus on client service and closing deals. The new process also eliminates the potential for some lenders to be overlooked due to broker preferences. The benefit for our clients is that they end up get- ting the best deal from the lender, along with the undivided focus from their broker. We estimate that our brokers spend 20 percent of their day on the back- and-forth involved in locking down financing terms. This is time they can now use to structure the deals for the client. The banks like it, too, because they have a go-to person to work through all the deals that are on the table at the time. From a company stand point, our brokers are noticing that the conversion rate of deals is increasing. Bank wins, client wins, broker wins and the company wins. How do you stay competitive? First, aside from our larger clients, we have an un- yielding commitment to what we see as a continued under-served market of smaller owners and investors of residential, retail, office and industrial properties. This is what we do, and our clients know that and trust our brokers to be singularly focused. There are no conflicts of interest. The second factor is we try new strategies that
per month last year. I’m confident that we will see that figure increase by as much as two-thirds before the year is out. What new initiatives are you using to make your 2016 goals? We constantly look at our internal operations and at how we can improve deal execution. To that end, one of our biggest changes this year is the formation of a new division called QTS, which stands for Quotes & Term Sheets. This is a little inside baseball, but what it ultimately does is streamline the process to ensure that each loan is placed with the best lender by leveraging all company relationships, not just those of the individual brokers. What we found is that individual brokers tend to work with a few banks, each having different rolo- dexes. But this new division is made up of financial specialists who shop clients’ deals to Eastern Union’s
“Ask the Professor” Ronald M. Shapiro, Rutgers Business School — Newark & New Brunswick In our real estate finance class, we teach students the essentials in present value mathematics since real estate involves paying and receiving cash across different time periods. Examples would include taking out a mortgage now and paying it back monthly, purchasing a property now and selling it at a future date or signing a lease and paying rent monthly. Accordingly, this month’s question is about the time value of money. Suppose you have the opportunity to purchase a property today that you believe will be worth $1,000,000 in 5 years. Considering its location, investment risks and alternative uses for your money, you require a minimum annual return of 8%. How much should you pay for this investment? Q
a. $375,877 b. $518,220 c. $680,583 d. $726,144 e. None of the above.
Meet the Professor
Ronald M. Shapiro is As- sistant Professor of Pro- fessional Practice in the Finance and Economics Department at Rutgers Business School of New- ark and New Brunswick where he teaches real estate finance. Prior to RutgersBusiness School, Ronwas SVPwithUnion Center National Bank.
In order to answer this question, you need a financial calculator and more importantly, you need to know how to use it. The question is asking for the present value or amount you would pay for this investment given the time period (5 yrs); interest rate (8%) and future value of the in- vestment ($1,000,000). If you input into your financial calculator the three given variables, you can then solve for the present value or the purchase price. The correct answer is “c”. Alternatively, you can use the formula be- low to derive the same answer: PV = FV / (1 + .08) 5th power (exponential)
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