Bruce Cohen, chief executive officer of Chicago-based Wrightwood Capital, has an unconventional but clear formula for success: going back to the future. [??] How well that works is reflected in the vigorous growth of the firm, a leading provider of structured capital to the real estate industry. Wrightwood is on target to do $1.3 billion in first-mortgage financing in 2006 compared with $760 million in 2005, according to Cohen. In addition, the 2006 slate calls for $200 million in net lease acquisitions, mezzanine or preferred-equity investments. For 2007, the financing volume is projected to reach $1.8 billion. [??] Moreover, the firm maintains a rock-solid foundation--a $2 billion balance sheet of permanent capital. Cohen says few privately held firms have that level of capital availability. "We're the best-kept secret in the real estate industry," he says. [??] "We're institutionally capitalized, but very entrepreneurial in the way we do business. Our ability to deliver highly tailored, highly flexible entrepreneurial capital to the industry represents real value to our borrowers," says Cohen. [??] The back-to the-future component of the firm's game plan derives from the fact Wright-wood is adopting the business model of a predecessor. Yet it is tailoring that model to the new realities of the current real estate financing marketplace.
Adopts Heller business model
The model being emulated is the Heller Real Estate Finance Division of former Chicago-based financial services giant Walter E. Heller & Co., acquired by Fairfield, Connecticut-based General Electric Co. (GE) in 2001.
Cohen explains, "While we're replicating that model, we're also reflecting the dramatic changes taking place in the real estate capital markets. That includes the migration of capital delivery from banks and life companies to niche providers like ourselves."
He defines the model as delivery of an array of structured capital to the market, including bridge, construction, mezzanine, preferred-equity and joint-venture capital tailored to the particular needs of the clients.
Thomas Jaekel is Wrightwood's managing director and chief investment officer, who was president of Heller Real Estate Finance from 1990 to 1994, prior to joining Wright-wood. He defines the basic elements of the model as attracting and retaining the best people. That was the key to success at Heller and is the key at Wrightwood, too, he says.
Why replicate the Heller model? Cohen says, "We perceived a tremendous demand for delivery of structured capital to the market. With the disappearance of many specialty-finance providers, we felt that would create a great opportunity for us to serve the market."
Jaekel adds, "The positive aspects of Heller Real Estate Finance revolved to a great degree around the culture of the company--the way it treated its clients and its associates. It was an environment in which its people were focused on delivering a higher level of responsiveness and ease of doing business for our clients."
Both Jaekel and Cohen point out that Wrightwood's platform differs in its stage of development from what Heller Real Estate Finance was when it was acquired by GE. However, plans are in the works to expand the product mix.
At present, Wrightwood's product roster includes construction and bridge loans (both recourse and nonrecourse), mezzanine and selective-equity financing. Cohen says mezzanine and preferred-equity financing will be greatly expanded in 2007, and the firm is looking at specialty products it might offer in the future for business segments such as hospitality, health care, manufacturing, housing and land.
The company is a relatively new player in the market, formed in June 2004 from Chicago-based Cohen Financial LP. However, the team has largely been together for 10 years, during which it served as a principal investment arm of Cohen Financial. …