Emerald Creek Capital's Mark Penna On Firm's 10 Year Anniversary

Happy Birthday, Emerald Creek Capital! The bridge lender turned 10 recently, having been launched at a pretty interesting time—shortly after the global financial crisis. Since then, it’s grown its staff count, its capital base and its average loan size. Despite increased competition in the bridge lending space, the company is sticking to its core disciplines and prides itself on its speed of execution when the right deal presents itself. In November, it provided a $40 million loan to Emmut Properties for its new hotel at 138 Bowery on the Lower East Side.

Commercial Observer caught up with co-founder Mark Penna to get his take on the past decade.

Commercial Observer: You co-founded Emerald Creek in 2009 with Mark Bahiri. What was the opportunity you saw for the firm at that time?

Mark Penna: I was in finance my whole career, and spent seven years at Neuberger Berman, which was a wholly-owned subsidiary of Lehman Brothers at the time. Coming off the financial crisis in 2008, I had a very acute, inside view of the market distress. I recognized that capital markets were going to be dislocated for a substantial period of time, and I thought that presented an opportunity to be a supplier of capital.

What were the key lessons that the crisis taught you?

Things can always get worse than people predict. In extreme times things tend to “break the model” and get far worse than people anticipate. So, to be truly conservative, you really have to think about extreme assumptions. Also, good times tend to stay good for longer than people think—even when people think things are overvalued—and bad times tend to stay bad a little bit longer, too. Going through the tremendous stress in the system really played into people’s emotions, they got very emotionally concerned about their capital and how bad the world was going to be. But, that also created opportunities.

What was Emerald’s first year like, given the state of the market?

Obviously, starting a business in the real estate debt space in 2009 was not the most popular choice. There was a lot of damage that had been done and people were very gun shy, so the amount of lending opportunities in the market place was limited but quite good. There wasn’t a lot of volume because people were scared to transact—both on the debt and equity side. I think a long-term positive to us was that we did not believe this was Armageddon; we knew it was bad but we did believe that the markets would come back and heal. We knew that if we were able to come into the market and establish ourselves as a reliable check writer and lender in times of stress, we would gain a lot of credibility when the market was healthy again.

What was the biggest challenge in establishing yourself?

Trust is built with experience; you can promise a lot of things to people but, ultimately, it’s about how you execute and their experience with you. We spent a lot of time talking to people over the phone and in person, building relationships and doing deals. Each deal builds momentum, and you do your first $5 million, $10 million, $20 million then $40 million deal and once you climb that ladder you start to get good references and people know you’re a reliable source of business.

How has the company evolved over the past 10 years?

We started the company with four people; Mark [Bahiri], Jeff Seidler, Mike Cleaver and myself. Today we’re 16 people. It’s been 10 years and we’ve hired 12 people so essentially one person per year. The challenges are many, it’s never easy. Nobody is there to help when you’re starting a business, it’s a lot nicer reading about it and the success stories but there are far more failures than there are successes. We’ve always understood that Emerald Creek does not have an ordained right to succeed and that we’d have to work very hard to make sure we’re able to continue to do business and grow the company. That’s a philosophy we still have today. We think about the business as if it’s still day one. We don’t take things for granted and we’re trying to earn the trust of our borrowers and investors by doing great deals. [commercial observer] - Cathy Cunningham

Keith Lee