January 8, 2013, Philly.com
Howard Lutnick, the chief executive who rebuilt Cantor Fitzgerald after his brother and more than 600 colleagues at the investment trading firm died in the World Trade Center attack, has lately pumped much of the firm’s profits into the commercial real estate business.
He’s betting that property deals will thrive on cheap, low-interest money, despite the slow economy.
Lutnick was in Philadelphia on Monday, talking up a Union League crowd of big-building brokers and clients from the former Grubb & Ellis and the U.S. operations of multinational Newmark Knight Frank, which he bought and combined into the Newmark Grubb Knight Frank commercial real estate brokerage, now an arm of Cantor’s publicly traded affiliate, BGC Partners.
With 5,000 U.S. employees, Lutnick says his firm now rivals industry leaders Jones Lang LaSalle and CB Richard Ellis in its nationwide sweep.
Why does the group care about Philadelphia, where office space and leases are frozen at the levels of 10 and 20 years ago?
Because they’re seeking deals all over America, not just in real estate hot spots like Manhattan: "You paint a painting, you don’t leave the ears out," said Barry Gosin, the Newmark Knight chief executive whom Lutnick appointed to head the combined company. The firm employs 60 local brokers, calling on Philadelphia law firms, colleges, insurers, landlords such as Brandywine and Liberty, media companies like Comcast, anyone with big space to build or move or sell.
Cantor Fitzgerald hopes to finance Newmark Knight clients’ deals, for example by helping revive the market for mortgage-backed securities, which froze in the 2008 financial crisis. It’s also developing "property derivatives," contracts Lutnick says will allow tenants in local markets such as Philadelphia to buy financial protection against rent increases – and landlords to hedge against falling rents.
"This is classic Wall Street," Lutnick told the crowd. "We evaluate risk and evaluate prices" for tenants and landlords, "like we do for bonds, like we do for sports teams" in Cantor’s Nevada sports-betting business, which allows Las Vegas and Lake Tahoe visitors and residents to bet legally on pro sports games.
Lutnick says real estate is attracting enough interest to make profits, despite what he expects will be years of 2 percent economic growth, in a nation held back by political fights over federal benefits, spending cuts and tax hikes. "Interest rates are going to stay virtually nil for a long time," he said. "On Wall Street, that’s boring. But in real estate," where cheap borrowed money is a powerful booster for anyone with cash to invest, "to have no interest rates, is super."