Deepening Decades-Long Relationships Helps the Bank Grow
At IDB Bank, commercial real estate lending is really about people.
The nearly 70-year-old bank has built its commercial real estate business by fostering deep relationships with its customers, rapid decision-making, and the ability to develop custom-tailored loans with both its own and international resources.
“Our mantra: ‘It’s Personal’,” said Sten Sandlund, senior vice president and manager of New York Commercial Real Estate Lending. “We’re big enough to handle all of our customers’ capital and financing needs, yet small enough to know who our customers are. We can deal with them on a more personal basis than our competitors do.”
IDB Bank is a full-service U.S. bank that is a franchise of IDB Ltd., one of the three largest commercial banks in Israel. The Israeli company established a representative office in New York City in 1949, and in 1962 became one of the first foreign banks to open a branch in the City when New York State banking laws were changed. In March 2000, IDB Bank became a wholly owned subsidiary of Discount Bancorp, a Delaware holding company that also owns Discount Bank in Israel. Today, IDB Bank operates branches in Staten Island; Brooklyn; Short Hills, NJ; Melville, NY; Los Angeles; Beverly Hills; and Aventura, FL. Nearly 70 years on, the bank still works with some of its early clients, offering a variety of products including fixed and floating-rate loans, credit lines, and letters of credit.
“What makes us unique is we’ve been here longer, we have a much deeper market penetration than our Israeli competitors and we are a U.S. bank with an Israeli parent, as opposed to others that are branches of an Israeli bank,” Sandlund said. “We have many U.S. customers, many with no ties to Israel. However, we do have a competitive advantage when dealing with all matters Israeli.”
The other aspect that IDB brings to its customer is its ability to syndicate larger loans, agenting for institutional investors from Israel as participants.
“That’s unique, among the U.S. banks we compete with and participate with—we have that old network. We’re known, and we have the credibility. We can syndicate and participate with the expected middle market lenders but also have the added edge of being able to organize our own larger loan syndications with Israeli institutional investors,” Sandlund noted.
The commercial real estate division focuses on two businesses: on-book loans for the middle market, ranging from $5 million to $40 million, but typically around $20 million to $25 million; and a wholesale lending business of syndicated loans exceeding $40 million (and ranging up to $100 million).
The core market for commercial real estate lending historically has extended from the New York area south to metro Philadelphia and north to New Haven, CT. IDB also operates lending teams working in offices located in Los Angeles and Aventura to focus on the growing markets of Southern California and South Florida.
“We’ve been growing our business for years now, counter to trends of some of our competitors,” Sandlund explained. “The New York portfolio is three times what it was five years ago, from $400 million to approximately $1.3 billion, and staffing has grown proportionately.” The bank is most proud, he said, that earnings performance growth has been greater relatively than portfolio or staff growth.
As a result, the staff has grown organically—IDB brings in interns each summer, many of whom become permanent hires and develop their careers.
“They grow with the bank, they grow with the business, they grow with the customers,” Sandlund said.
The bank’s client list remains closely held. Growth has come through referrals and current clients add more business and recommend IDB to others.
“Some of our relationships are as long as 50 years. We have deep inroads into some of the traditional communities an Israeli bank would penetrate, such as the Sephardic and Persian communities,” Sandlund noted. “Our portfolio is global and pan-American. We have customers from all walks of life.”
Investments range across several commercial real estate sectors and include acquisitions, refinancing, and redevelopments.
“We don’t have preferences regarding product type. Our business is about backing people who are experts in what they do,” Sandlund said. “We do of course risk-manage our exposure. It’s no secret that retail, luxury residential, and hospitality are facing challenges. But In New York, we can’t find enough of any residential that approaches affordability. That’s a good market, and we are active.
The bank also is looking at opportunities in the rapidly improving office sector, and at industrial properties, particularly logistics and distribution uses.
“It all comes down to working with the best players in that segment. You’re banking them. They are the best judges of the investments. We do all of our homework, but we listen to our customer,” Sandlund said.
Its tight organizational structure allows IDB to respond to its customers quickly, and the bank has built a reputation as an acquisition lender over the past five years, Sandlund continued. Rather than the weeks some banks can take for acquisitions, IDB has been able to close some transactions in as little as 10 days.
“We want to be on the front page for every acquirer on their list of lenders to call,” Sandlund noted. “We’re proud of being known as a lender who can close a transaction in a short period of time. And we’ve never short-cut asset quality or our due diligence. Ever. We’ve just found ways to be more efficient in our process.”
The bank’s markets in New York, Los Angeles, and Miami comprise $2 billion of real estate loans, and up to another $1 billion is available for real estate lending.
“Those funds are available for all three areas, but the greatest sums will be spent in New York. Ninety percent of our originations come from Manhattan and Brooklyn, two of the largest and deepest real estate markets in the country,” Sandlund observed. “I see our growth coming from continuing to penetrate our core markets, which has so much space in which to grow. But our goals going forward are not just to grow the loan book, but to grow our P&L by deepening our relationships with our existing customer base and grow earnings from that.”
Sten F. B. Sandlund
IDB Bank
511 5th Avenue
New York, NY 10017
212-551-8127
ssandlund@idbny.com
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