Deutsche Bank Berkshire Mortgage, formerly Berkshire Mortgage, is located at 1 Beacon St. in Boston.
In the past two decades, Boston-based Berkshire Mortgage has experienced continual growth and many changes. Most recently, the company became part of Deutsche Bank’s Global Commercial Real Estate Group and was renamed Deutsche Bank Berkshire Mortgage.
Deutsche Bank, an international institution based in Germany, acquired substantially all of Berkshire Mortgage’s origination and servicing assets last October. The bank is a leader in the commercial real estate debt market, with a focus on originating, financing, structuring, securitizing, syndicating and trading commercial real estate debt.
Peter Donovan, chief executive officer for DBBM – which is located at 1 Beacon St. in Boston – said it will take time for the mortgage company to become familiar with the bank’s products and take advantage of its offerings.
“We’re just starting to see the benefit of [Deutsche Bank’s resources],” said Peter Donovan, chief executive officer of DBBM, adding that he fully expects to see the benefits of the acquisition over the next 12 to 18 months.
There are benefits for Deutsche Bank, as well.
“We look forward to Deutsche Bank Berkshire Mortgage advancing our position in the commercial real estate debt market,” Jon Vaccaro, Deutsche’s global head of commercial real estate, said at the time of the acquisition last year. “The joining of our two organizations brings exciting new opportunities to Deutsche Bank in the [United States] by adding new multifamily product, distribution, origination and servicing capabilities.”
‘A State of Transition’
The Berkshire Group, a diversified real estate and financial services firm, was founded in 1969 by brothers Douglas and George Krupp. Berkshire Mortgage, a subsidiary of Berkshire Group, was founded in 1987 and has offices throughout the country.
Before the acquisition, Berkshire Mortgage was one of the largest privately held commercial mortgage lenders in the United States, specializing in financing for multifamily real estate. According to Deutsche Bank, DBBM’s nationwide distribution platform originated $3.5 billion of multifamily mortgages in 2003 and the company services a mortgage portfolio in excess of $18 billion.
Donovan was named president of the mortgage company in 1991 and, according to the company’s Web site, he began an “aggressive effort” to expand the company and “increase the number of lending sources.” In 1997, Berkshire Mortgage Finance increased its production base and doubled its servicing portfolio by acquiring the Patrician Financial Co., based in Maryland. Three years later, the Boston-based firm expanded west and acquired Bankers Mutual in California.
Although based in Boston, Donovan said DBBM has typically had more business in other areas of the United States, such as California, Texas and Florida.
“Most of our business is away from Massachusetts,” Donovan said.
Before being acquired by Deutsche Bank, DBBM had a more narrow focus financing multifamily properties. But now the company has the ability to finance projects such as office buildings, hotels and shopping centers. Donovan said because of the relationship with Deutsche Bank, he is beginning to see more business in Massachusetts.
Multifamily deals, especially condo conversion loans, have increased.
“It is reflective of how hot the condo market is,” he said.
However, multifamily financing is only 30 percent of the debt market, Donovan said. Partnering with Deutsche Bank gives DBBM the ability to tap into the other 70 percent.
Acknowledging that Berkshire Mortgage had a recognized presence in Massachusetts before, especially in the multifamily arena, Donovan said he expects changes ahead.
“I think our role is going to change as a result of the sale [to Deutsche Bank],” he said.
Within the next year, Donovan said, DBBM likely will expand its footprint in Massachusetts.
“We’re in a state of transition,” he said.
DBBM has recently financed several properties in the Boston area, including a $14 million deal in Brighton and $9 million deal involving the Charlesbank Estates in Waltham. The latter property was financed through a Freddie Mac fixed-to-float loan. Donovan said DBBM has been a tremendous source of capital for the company since the 1980s.
“Our relationship with each [government-sponsored enterprise] is a little different,” Donovan said.
When working with Fannie Mae, Donovan said DBBM shares some of the risk, underwriting is delegated to DBBM and the company is allowed to approve loans up to a certain size. With Freddie Mac, DBBM does not share the risk and Freddie Mac does the underwriting.
The Federal Housing Authority is another entity providing capital for DBBM. As is the case with Freddie Mac, DBBM doesn’t assume the credit risk. DBBM brings deals to the FHA and some underwriting is delegated to the company. It generally takes a little longer, between four to six months, for a loan to be completed with FHA.
Before joining up with Deutsche Bank, DBBM received several accolades in the industry. In 2002, DBBM was named Fannie Mae’s top Delegated Underwriting and Servicing lender in production, the No. 1 DUS lender overall in production and the No. 1 lender overall in production.
Since 1995, according to DBBM’s Web site, the company has been an approved Freddie Mac Program Plus Seller/Servicer. In 2004, DBBM closed $1.35 billion in Freddie Mac loans and also were named 2004’s No. 1 lender in production in the Midwest and West region. DBBM was also named the No. 1 multifamily affordable housing lender in production, the No. 3 overall lender in production and voted the top Freddie Mac lender by the readers of “Apartment Finance Today” in 2004.
Some of DBBM’s most recent transactions occurred in early April with DBBM providing three Freddie Mac adjustable-rate mortgages totaling $79 million for the refinancing of properties in New Jersey, Delaware and Maryland. By using three separate adjustable rate mortgages from Freddie Mac, DBBM was able to finance a 504-unit garden-style apartment complex in New Jersey, a 500-unit garden-style apartment complex in Maryland and a 414-unit garden-style apartment complex in Delaware.
Jennifer Jope may be reached at jjope@thewarrengroup.com.
