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Jan 16, 2018
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Jun 06 2016


Jonathan Pollack has a quiet confidence and a guarded disposition. Throughout our near-hour of conversing, he was open and composed, revealing his vast knowledge of real estate capital markets. For someone of his age and level of authority, he is pleasantly modest. Pollack is the Senior Managing Director and Global Head of the Blackstone Real Estate Debt Strategies Group. He started there in June 2015, after 16 years at Deutsche Bank, where he was most recently a Managing Director and Global Head of Commercial Real Estate, as well as Head of Risk for Structured Finance.

Path to Real Estate
Pollack is well positioned to take a leadership position at such an entrepreneurial firm. He started his own ventures while an undergraduate at Northwestern. "I was a confused undergrad…literally, I had no idea what I wanted to do," Pollack said. He started a couple of businesses on campus, primarily dedicating his time to a laundry service and a coupon magazine until he "needed to get a real job for my junior year summer." He interned for a real estate entrepreneur and came to the conclusion: "I don’t completely understand what investment banks do but this, I get…I loved it." During the interview season his senior year, he was "the real estate guy at Northwestern", which led to a full time position after graduation in Nomura’s commercial real estate finance business. Two months later, the Russian debt crisis happened and the business came to a halt. Pollack joked "it was nice because I hadn’t really seen daylight in two months." It also provided an incredible learning opportunity as many senior employees left the firm, so Pollack was able to take on greater responsibility. He soon moved to Deutsche Bank, where he moved up the ranks.

Leading at Deutsche Bank and Blackstone
While at Deutsche Bank, Pollack was given the Number 1 spot on Commercial Observer’s "50 Most Important People in Real Estate" list in February 2014, as well as number 2 in 2015 and 2016 . Realty Today named him one of the 7 most notable names in real estate in August 2015. That same month, Forbes ranked him as one of their 7 Kingmakers of Real Estate.

In the press release announcing Pollack’s move to Blackstone, the founder of Blackstone Real Estate Debt Strategies Group, Mike Nash, commented, "Our real estate debt business has grown dramatically in the past few years, in size, scope and geography. Today, we manage nearly $10 billion of investor capital through our publicly traded mortgage REIT (BXMT), our private mezzanine debt funds, and our CMBS investing platforms. Our recent purchase of mortgages from General Electric has scaled the business even further. We feel quite fortunate that we can attract a great talent and industry leader like Jonathan. Looking forward, Jonathan’s talents and experience will help accelerate and enhance our growth, as we become one of the pre-eminent real-estate finance firms in the world."

Pollack describes his career at Deutsche Bank and his recent transition to Blackstone in a much more humble fashion. He said, due to "some measure of luck…I kept finding myself in roles where there were gaps to fill and not a lot of people to fill them." Deutsche Bank moved Pollack to London, where he was able to help build a team from two to approximately 120 people and allow Deutsche Bank to become the biggest Wall Street lender in Europe. In order to build that business, Pollack focused on "increments and adjacencies," a thesis he still refers to at Blackstone. "You have to figure out ‘what is my core business, what am I good at, and what else could I be doing with that skill set? What is my capital well-suited for? And then, how can I go into that space and scale up? Is it the right time in the market to do that?"

In the "early 2000s, Europe was just waking up to the securitization market and European capital markets were becoming unified under the Euro. Those two things combined to create a really vibrant capital markets environment that hadn’t existed, and hasn’t really existed since the credit crisis. This was just getting going in ’01. Our growth was organic but it was fast, and, for me, it was an amazing opportunity because I was at the forefront of an enormous business as it was being built out. By the third or fourth year my boss was like, ‘look I can’t have 100 people reporting to me,’ and I wound up managing a good portion of the team."

Weathering the Financial Crisis
Pollack’s next big challenge came with the most recent financial crisis. "You learn a lot when you have to reduce your staff so dramatically," Pollack said. "It gives you a lot of appreciation and respect for, not just the people themselves, but the value of a job, the value of a career, the importance of making sustainable decisions as you build an organization..."

Pollack moved back to the US with Deutsche Bank to in 2009. There, he "wrote a new business plan and got us ready for the new opportunity," making Deutsche Bank one of the only banks "ready to go when people started doing business again." Deutsche Bank began 2010 with a series of loan portfolio acquisitions and a large securitization of "an acquisition by Blackstone and a couple of partners," allowing the group to gain momentum. After that, Pollack said, "we were off to the races, and for five years [Deutsche Bank was] the biggest CMBS issuer. We just hit the market at the right time with a great team of people and some strong relationships."

Changes after the Financial Crisis
Since the financial crisis, the banking regulatory environment has become increasingly stringent, challenging, and complex. This caused banks to retreat from certain activities, including dramatically reducing CMBS and other securitized loans, and tightening underwriting standards overall. Banks began to focus their lending activities on core, stabilized, Class A properties in Central Business Districts of major cities. Blackstone Real Estate Debt Strategies, among other opportunistic debt providers, stepped in to fill this financing gap in 2008.

When asked if this shift in the debt landscape leaves Blackstone and other lenders with riskier debt opportunities, Pollack responded, "we view it as our opportunity to take make good risk adjusted loans. We manage risk [through] good diligence, by trying to select assets to finance that we think are strong assets with good long term value, and owned by sponsors that are capable of executing their business plans." Pollack continued, "That’s the micro dynamic. On a macro side we have to look at what is happening in the broader economy and what does the competitive landscape look like."

So while the changing debt regulatory landscape is a factor, Pollack also pointed to "a global economy that has experienced some recovery but it’s been uneven, and you have different paces of recovery in different parts of the world. Do we want to be spending time in London, Paris, New York, LA? Are the fundamentals in those markets good? And then once we commit ourselves to looking into different markets, its individual investment decisions on an asset by asset basis."

Trends

The investment trends that Pollack is willing to comment on are macro in scale:

  1. Recovery from the financial crisis has been uneven but "very positive in the major urban centers of the world." There is an overall shift of "people and jobs moving more towards urban centers." As a result, real estate investment has been focused "in the major markets."
  2. Development is going to be challenging going forward. Pollack is "cautious on the future of development, not because I think there’s anything problematic about what’s being built now, but when you have a successful development cycle, land prices go up and construction costs go up because there’s a lot of competition for materials and labor. Supply has been constrained in this cycle in most asset classes, with the exception of high end residential."
  3. CMBS financing could become less competitive due to new regulations. Pollack commented that the increased regulation is "creating more cost" for CMBS issuers, which will “change that part of the lending market and may impact loan pricing." However, given the changing regulatory environment, it’s hard to say precisely what the affect will be.
Words of Wisdom
Given this shift in the real estate landscape, is this a good time to be considering a career in real estate? Pollack offered his advice to current MBA students, but it has nothing to do with the regulatory changes or the cyclicality inherent in the real estate industry: "You’re going to follow a career path for the next several years. You start with a limited amount of knowledge and over time you’re going to get really good what you do. That on its own can be fulfilling, but it would be great to enjoy what you do as well. To me, that’s the most important thing. Start with the dream in mind, pursue learning opportunities, transaction opportunities, employment opportunities that drive you in that direction."

Pollack could have chosen any career path in real estate, but he has always been on the debt side. He didn’t choose a side when dolling out advice. "You don’t get to do everything. Being a real estate investor, being a developer, those are exciting paths too. I enjoy the challenge of all the different types of transactions we get to look at as a lender, because we’re not just one property investment shop doing five deals in one market. We’re looking at financing everyone’s five deals, so I get to work on all different types of real estate transactions around the country and around the world. To me that’s incredibly exciting. You won’t know until you start, but once you figure out what you like, keep trying to pursue that path." Pollack has proven that not only is he the real estate guy at Northwestern, he is also really good at building a real estate debt platform.

About the Author

This article was written by Christine Bullock '17.