An interview with Shlomi Ronen, Senior Vice President, on the current market and community involvement.
Shlomi’s tenure at George Smith Partners started nearly eight years ago as a summer intern. Over the past eight years he participated in one of the great financial rallies in history by raising capital for a wide variety of real estate investment and development projects. Given the current state of the financial markets he has broadened his scope of services to help his clients engage in the opportunities that exist today, specifically note sales and loan workout consulting. All the while he has stayed active in a number of community organizations including the Los Angeles Jewish Federation and the University of Southern California.
What do you see as the most pressing question your clients have in today’s market?
It seems as though everyone wants to know when the current financial malaise will end. Monday’s announcement of the Government’s Private-Public Investment Fund will speed up the recovery process as it is intended to free up capital at the banks by enabling them to sell assets at a government subsidized market price that will theoretically be higher than the current market price; investors should be willing to pay more for the assets given that they will need a smaller return in order to achieve their return hurdles as a result of only investing 7% of the eventual purchase price versus 100% in today’s market.
So do you believe that the Private-Public Investment Fund solves the financial crisis?
It’s a good step but we are not there yet. There are two big issues that still need to be addressed. First, we need the commercial loan securitization process to start again. In 2009 alone $15 billion CMBS loans are scheduled to mature. Furthermore, through 2011 an additional $75 billion in CMBS loans are scheduled to mature. Lack of lending capacity at the banks and life companies combined with significant declines in valuation and deterioration of cash flow will continue to put significant pressure on the commercial real estate market.
Second, and also related to the securitization market, is that there will be a significant number bridge and construction loans maturing in 2009 were underwritten 12-24 months ago on the assumption that the loans will be refinanced by CMBS or Agency loans. CMBS loan origination is currently non-existent and the Agencies (Fannie & Freddie) have tightened their underwriting criteria which has constrained the amount of leverage that a Borrower can get. Thereby creating further stress on the balance sheets of the lenders that Private-Public Investment Fund is geared to resolve.
Let’s change the subject to your community involvement as I know that it plays a major role in your life. Why are you involved and where are you allocating your time?
The firm’s founders created a socially conscious company and have instilled those values in the culture of firm. The question of why to be involved is irrelevant in our firm because everyone is involved with some cause. It becomes a question of where are you involved.
I have focused the majority of my time and money on two main causes; The Los Angeles Jewish Federation and USC. I’m currently the Young Leadership Chair of the Los Angeles Jewish Federation’s real estate and construction division (“REC”). The REC raises $9 million a year that is then distributed to those in need both locally, Israel, and communities around the world. As Chair of the REC’s Young Leadership group I oversee an executive committee of twelve young leaders and together we create engagement and fundraising opportunities for other young (mostly Jewish) real estate professionals in Los Angeles.
My other passion is University of Southern California. I was very fortunate to attend USC for my MBA. While attending USC, the alumni network and the faculty presented me with opportunities that have significantly aided me in my career. For that I feel indebted to the school and give back as often as I can. In recent years I’ve guest lectured on multiple occasions at USC and have spoken regularly to the Graduate Real Estate Association club. I have also met/counseled countless graduate and undergraduate real estate students to help them figure out their career path in real estate.
