Since 1919, R.W. Baird, a Milwaukee-based investment banking and financial services firm, has been the go-to bank for small to middle-market companies going public or in need of a second offering. Although none of its IPOs are household names, the firm — which boasts 2,300 employees and 70 offices globally — chalked up $545 million in revenues in 2003 and handled $42 billion in merger and acquisitionsince 1995. Institutional investors have consistently ranked Baird No. 1 for the high quality of its research, according to Greenwich, Conn.-based research firm Greenwich Associates. All that's been lacking is a real estate product.
In May 2004, Baird recruited Mark Decker, a former senior vice president for mid-Atlantic investment banking firm Ferris, Baker, Watts Inc., to lead a new team focusing on real estate investment trusts (REITs). Decker, who is based in Washington D.C., is a veteran REIT dealmaker and the former president of the National Association of Real Estate Investment Trusts (NAREIT). During his tenure at NAREIT from 1985 to 1997, Decker was instrumental in modernizing the REIT industry — persuading Congress, for example, to permit REITs to both own and manage property, and to loosen rules related to pension fund investments in REITs. NREI recently talked with Decker about Baird's expansion into real estate investment banking.
NREI: Why has R.W. Baird entered the real estate investment banking field?
Decker: REITs were an arrow missing in their quiver. They're in a lot of conservative all-American business niches, but they were not in real estate. Real estate tends to be fairly conservative — small and mid-cap businesses, which fits the Baird niche beautifully. Part of the answer is baby boomers are getting older and people want income. Good, old-fashioned, dividend-paying stocks are back.
NREI: What precipitated the firm's interest in the field at this time?
Decker: What Baird needed was a complete team, and we brought them that. The firm recruited the entire team that I had assembled at Ferris, Baker, Watts, which includes my son, Mark O. Decker Jr. — a total of three bankers, two researchers and me. The culture of our group and the culture of Baird was really a hand-and-glove fit. Baird was quality oriented — relationship driven, not transaction driven. We shared that philosophy.
NREI: To what degree does your son play a role in the investment banking division?
Decker: We do operate as a team. My son is the professional who really executes the business. My job is to attract the business. He helps make a tough business a lot of fun.
NREI: How will the current interest rate environment impact your REIT strategy?
Decker: Generally, interest rates shouldn't affect investment attitudes much. If you had dramatically increasing rates, yield instruments such as bonds and Treasuries would become more competitive. On the other hand, from the management perspective, [a rate increase] will create buying opportunities that we haven't seen in a while. Low interest rates have kept private owners floating when they would have becomeand become sellers.
NREI: In an era where investment banks are perceived as a commodity, how will Baird differentiate itself in the world of publicly traded real estate?
Decker: A commodity business is where you throw a lot of people out there and do deals, and deals get done. Building a [differentiated] business requires a service mentality. I left the comfortable world of the association business to build a business, not just do transactions, and there's a very big difference.
NREI: What are your daily responsibilities, and what short-term goals have you set for the real estate banking division?
Decker: My day-to-day responsibilities are to present the Baird platform and our real estate banking capability to the REIT industry as carefully as we can and to target prospective clients. We will focus on small and mid-cap REITs with $100 million to $3 billion of market capitalization.