A commercial success: Cohen Financial LP, Chicago, has grown into an investment banking firm with national reach by putting its customers first.

Author:Taylor, Marshall
Position:Commercial
 
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IN THE TOP LEFT-HAND CORNER ON THE COVER OF NEARLY every marketing piece put out by Cohen Financial LP, it says the company's mission "is to be the pre-eminent distribution channel for commercial real estate by serving as the link between users of capital and providers of capital." The Chicago-based firm pursues this mission "by serving our clients in three primary roles: agent, advisor and principal."

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"This structure allows our agents (sales professionals), advisors (objective experts) and principals (direct investors) to work together in-house," it says on the opening page of a company brochure targeted to the "user of capital." "The synergy of these different perspectives creates a competitive edge that makes things happen, and happen quickly. We aren't the largest agent, advisor or principal, but we are the only firm that offers clients the integrated services of all three critical roles."

That encapsulates the Cohen Financial approach to the business.

It is a customer-centric approach, both for users and providers of capital. And it has helped transform the firm, with 40-year mortgage banking roots in Chicago, into an investment bank with national reach--the only one in the country devoted exclusively to commercial real estate finance, according to Cohen Financial.

"If we have faith in the customer--the user of capital--and understand his business plan, and make judgments as to whether the plan is good or bad and the customer has the capacity to execute it, then we're three-quarters of the way through the investment committee already," says Jack M. Cohen, chief executive officer of Cohen Financial. So the approach is: Listen to the customer, develop a strategic plan and then execute it.

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"We must understand the strategic vision of the customer for bricks and mortar, and finance," Cohen says.

"Most of the mortgage banking industry is selling product," Cohen says. "We want to sell service. We come to a customer with a blank sheet and ask him to tell us his objectives, and then we offer a solution. We fill in the sheet with products and services and let the customer choose. We talk it out with the customer and come back with a capital structure based on his business strategy. It's a better deal for us, too, because the customer sees us as serving his needs."

"We really strive to understand the business plan of the client and how the real estate asset fits into that plan," says Bill Wein, managing director of the capital markets unit for Cohen Financial. "We sell ourselves as providers of intellectual capital to clients. We want to be the go-to guy for clients wanting to figure out the trends in the industry and how to profit from them."

"I'm not suggesting that we're smarter, better and bigger than many in the industry," Cohen says. "In reality, our success comes from being reactive and responsive to the customer."

Cohen Financial as an investment banker can provide customers with multiple products and services through multiple roles to multiple locations, to borrow a Cohen phrase. Acting as a principal and adviser, the company can bring dimensions to a transaction that a pure mortgage banker or broker cannot.

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The firm seeks to be a "value-added" component for clients by offering them different capital sources for different risk tolerances. This approach has enabled Cohen Financial to earn a 21 percent yield per annum on its equity investments in deals over the past five years.

Cohen doesn't disguise any trade secrets when discussing his firm's formula for business. That's because he admits he doesn't have any. "All I'm doing is stealing someone else's good ideas freely and putting them into practice," he says. "And I want to make these ideas and how we use them--our best practices--open and available for anyone in the industry to steal. That creates higher-quality ballplayers"--and higher-quality companies to acquire, as some in the industry point out, based on Cohen Financial's recent track record of acquiring independent mortgage banking firms.

Cohen Financial, with 12 offices from San Francisco to Miami, including its Chicago headquarters, generated an estimated $3 billion in commercial mortgage production from more than 400 transactions in 2003. That ranks the company in the top 10 of producers, according to the Mortgage Bankers Association (MBA). Industry observers point out that Cohen Financial is likely the leading producer among independent commercial mortgage companies. The firm also holds a $3.5 billion servicing portfolio, and in the past five years has invested $1.13 billion in 185 deals as a principal, according to Cohen.

Through efficiency, escalating sales productivity, a clear and uncomplicated customer vision, talented people and a strong commitment to training and education, among other business virtues, Cohen Financial has been able to achieve this volume as a mid-market company, with an average loan size of between $7 million and $8 million. The company opened its first regional office in Madison, Wisconsin, in 1995, which complemented its concentration on mid-market (medium loan size) business. Subsequently, it has acquired offices in other second-and third-tier markets, including Portland, Oregon; Denver; and Sacramento, California.

"I'm a big believer in national firms and not regional boutiques," says Cohen. In March 2003, Cohen Financial added to its national scope by bringing on board the Precept System, an Internet-based commercial mortgage auction platform, as a proprietary tool for its mortgage banking producers. Under its licensing agreement, Cohen Financial runs the platform on behalf of Precept...

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