By Brian Pascus

Don Peebles’ eponymous real estate development firm is stepping into the private credit space. 

The Peebles Corporation announced Friday that it has founded Willowbrook Partners, a Miami-based private credit firm that aims to provide bespoke credit solutions in the $5 million to $50 million range for commercial real estate projects, CO has learned. 

Peebles will serve as co-chairman of the board for the new lending company. 

Peebles’s son, Donahue Peebles III, who will also serve as co-chairman of the new venture, told CO that the Peebles Corporation anticipates Willowbrook Partners to complete “several hundred million dollars” worth of transaction volume in its first year of operation. 

“We have some big ambitions on total transaction value over the first year,” said Donahue Peebles III. “And we’re excited to jump in at a moment where we can add a ton of value to sponsors looking to invest in markets that we’re extraordinarily familiar with.”  

Willowbrook Partners will be led by CEO Sten Sandlund, a four-decade CRE veteran who previously served as principal at Safko Capital and senior vice president at Israel Discount Bank of New York. Sundlund said that, in its first year, Willowbrook Partners is targeting mainly bridge lending and value-add lending in the “middle market space,” between $5 million and $50 million per project. 

“Part of it is that I’ve found the middle market to be a great place to work throughout my entire career,” he said. “Eighty-five percent of all commercial real estate in the U.S. are middle-market assets, so it’s a nice niche to work in.” 

Donahue Peebles III noted that, besides bridge and value-add lending, Willowbrook Partners will also lend on acquisition and pre-development financing. The firm aims to target investments across all asset classes, but will primarily focus on projects situated up and down the Interstate 95 corridor that stretches from Boston and New York to the Carolinas and South Florida. 

“It will be asset classes that we’re familiar with and markets where we have been active historically and, as a consequence, have a fair degree of underwriting certainty as we move through the process,” he said. 

 

In terms of the timing, both Peebles and Sandlund emphasized that the recent retreat of traditional lenders from large-scale CRE lending, together with more stringent capital requirements and the ongoing consolidation of many regional banks, have created a need for private credit to solve many problems associated with upside down CRE capital stacks. 

“We’re living through what we can consider a seismic shift in the banking sector’s approach to commercial real estate lending, and it’s left a broad avenue open for private credit to step in and add value with limited institutional competition,” said Donahue Peebles III.  

Sandlund said that the current bifurcation between institutional lenders and private lenders has been years in the making, and that many traditional lenders have been incentivized to offer only loans with lower loan-to-value ratios on CRE transactions – leaving the door open for middle-market private credit solutions on many projects. 

“That makes it a fit for a private lender to work in concert with the institutional lenders and to take up that side of the market,” he said. 

Willowbrook Partners will be primarily capitalized out of the Peebles Corporation family office. The firm believes that its decades of experience on the side of real estate development will translate into a new era of relationship banking from an upstart lender who knows what it’s like to be on the sponsorship side of the CRE equation. 

“We’re developers who know what it’s like to be on the other side of the table, and as a consequence, we know how to behave as a lender so that our developer clients receive appropriate feedback on appropriate timelines,” said Donahue Peebles. “It’s what attracted us to the business model and made Sten the best person to run this business for us.”

Credit: Commercial Observer