HOLLIDAY FENOGLIO FOWLER LP (HFF), A LEADING PLAYER IN THE WORLD OF COMMERCIAL REAL ESTATE FINANCE, IS HAVING A GOOD YEAR. The company is charting further gains in 2004 following a record-setting year for transaction volume and expansion of its capital markets platform in 2003. * The firm, with 17 offices around the country, tallied transaction volume of $16.2 billion in 2003 with 942 debt-placement, structured-finance and investment sales. That represents a 20 percent increase over the $13.2 billion transaction volume posted in 2002 and the third year in a row that overall transaction volume has grown, according to the company. * HFF's production breakdown for 2003 by property type was: office, 39 percent; multifamily, 22 percent; retail, 22 percent; industrial, 5 percent; hotel/motel, 3 percent; mixed-use, 2 percent; and other, 7 percent. * "Our clients, both capital users and capital providers, have responded very positively to our integrated capital markets platform combining debt placement, structured finance, investment sales and loan servicing," says John Pelusi, HFF operating committee managing member and executive managing director, based in the company's Pittsburgh office.
HFF principals foresee transaction volume increases of possibly as much as 45 percent this year, buoyed by the low interest rate environment during the first half of 2004. Pelusi sees more capital flowing into commercial real estate now than at any other time during the last two decades.
HFF doesn't foresee problems from the Fed's first few small interest rate hikes, but concedes that future effects depend on how steep and quickly additional increases occur. Gradual increases won't have a significant impact, but a big hike would, HFF's executives say.
Pelusi says the market has already priced in the fact that interest rates will rise. "Higher interest rates mean that more people will be looking to sell and be seeking fixed-rate versus floating-rate debt."
Mark Gibson, executive managing director and a member of the operating committee, based in HFF's Dallas office, says, "We're more focused on the bond market, which was already priced to assume that the Fed will raise interest rates. The bond market impacts us by affecting our productivity in every line of our business."
A different kind of company
John Fowler is also an executive managing director of HFF and member of the operating committee. Like Gibson, he is one of the company's founding partners. He notes the privately held firm differs from its competitors in terms of its reach and structure.
"We have competition in each of our separate lines of business, but none do it all under one umbrella, on a national basis, as we do," Gibson explains. Fowler heads up operations for the company's Boston and Chicago offices.
Through its multiple business lines, HFF provides owners, lenders and investors full access to the entire commercial real estate capital markets spectrum via its relationships with a large number of clients and capital sources. These include life insurance companies, conduits, government agencies, banks, savings and loans, pension funds and their advisers, opportunity funds and private and public investors.
Pelusi runs down the list of investment sales, debt placement, structured finance and loan servicing. He says, "From the first dollar to the last dollar of capital, we're the only group in the country that does all of those things under one roof."
Scott McMullin, another executive managing director and member of the operating committee, based in HFF's Los Angeles office, says, "We're a pure intermediary and don't operate in competition with our clients. The clients' interests always come first."
Miami-based Manuel de Zarraga, also an executive managing director and member of the operating committee, comments, "We find that real estate clients today want a single point of control. …