Andrea Balkan’s Hands-On Approach to Lending
- Dec 04, 2020
Andrea Balkan’s 30-year career in real estate finance has taken her from loan originations at Chemical Bank to investment banking at Merrill Lynch and then to real estate funds at Brookfield, where she currently leads the funds as a managing partner. While current market conditions present a new challenge, Andrea Balkan’s breadth of experience provides her with the tools to forge through.
“Andrea is one of the most creative minds out there in the debt space,” Kathryn Gregorio, senior vice president at Brookfield Asset Management, told CPE. “There aren’t many people who can look at debt from a 360-degree perspective like she can, and you always learn a lot in doing a deal with her.”
Balkan began her career after graduating Wesleyan University and undergoing a credit training program at Chemical Bank. After spending some time in the corporate banking world, she seized an opportunity to move into the real estate finance side of the bank.
“Going into the real estate finance side, you were so much more hands-on,” said Balkan. “You were basically handed real estate projects and you underwrote the project to make a decision as to whether you wanted to lend on that project.”
During her time with Chemical Bank’s loan origination division, Balkan experienced the major credit disruptions of the late ’80s and early ’90s when many banks closed or were forced to receive federal financial assistance.
“I handled a lot of troubled situations at a pretty young age, which really was a great experience,” Balkan said. “While you’re going through it, it’s like trial by fire, but in hindsight, starting out as a workout person really helps inform your decisions throughout the rest of your career.”
Breaking into the principal side
After 12 years at Chemical Bank, she moved into Merrill Lynch’s investment banking and capital markets department. After four years at Merrill Lynch, she had a desire to step into the principal side of real estate finance.
“I didn’t love the originate-and-sell model,” Balkan said
Upon joining Brookfield in 2002, Brookfield kickstarted the company’s mezzanine platform with a plan to marry the company’s real estate lending expertise with its equity ownership expertise. Brookfield started its first mezzanine fund in 2004 and has ingrained itself into what has become a major part of the real estate finance world.
“If we originate a loan that we’re putting into one of our mezzanine funds, we live with that loan until it gets repaid,” Balkan explained of Brookfield’s model. “And if there’s a problem with the loan and we have to take ownership, we live with it until we stabilize the property and sell the property.”
Careful, steady growth
In her role overseeing Brookfield’s real estate funds, Balkan’s day-to-day responsibilities vary greatly. Some days involve meeting investors for fundraising and other days call for reporting to investors about the fund’s performance. On top of communicating with the investors, Balkan is also responsible for visiting properties that Brookfield may want to make a loan on and holding meetings with her team to discuss what new deals they’re recommending.
“What you focus on every day is different, which is great for me,” Balkan said. “If it was the same thing every day it would be boring.”
Balkan hasn’t been able to travel and meet investors as much due to COVID-19. But she teleconferences with investors as she continues to grow Brookfield’s mezzanine debt and monitor the COVID-19 situation with strong caution.
“We’ve always had a healthy respect for cycles,” Balkan said. “We don’t get excited when things are really great, and we don’t panic when things look bad.”
Instead, Balkan said, she and Brookfield aim for an equilibrium that allows the company to be opportunistic during a downturn. She explained that while the pandemic has caused serious consequences for people and their health, financial institutions are faring a lot better than they were in the 2008 Financial Crisis.
“There’s a lot of liquidity in the market right now and that helps minimize the negative impact on our lending business,” Balkan said. “I don’t want to minimize it because this crisis is much worse for people, but it’s probably not as bad for financial institutions.”
Since Brookfield doesn’t use repo finance in its business, it also did not face margin calls from their lenders in the early days of the pandemic, and the portfolio has held up fairly well.
“Andrea’s proven ability to successfully manage the business through multiple credit cycles speaks for itself,” Nailah Flake Brown, a managing director with Brookfield’s Real Estate Group, told CPE. “Her depth and breadth of knowledge is evident by her instincts to identify good investments and creativity to maximize returns and preserve investors’ capital.”
The company’s first four funds were focused on the United States while the latest Fund BREF V, which closed at $3 billion in 2017, has expanded to the U.K. and Europe. Balkan explained that Brookfield foresees strong opportunities in the U.K. and has even expanded its presence in the region. Additionally, Brookfield is looking at making more loans at a lower leverage point so investors can come to the company for loans at any leverage point, Balkan said.
“We like the mezzanine lending business,” Balkan said of Brookfield’s future funds. “We think it provides really great risk adjusted returns for both Brookfield’s capital and for our investors and we intend to continue to build out our suite of real estate debt products.”