End of an Era: Mazzei Is Leaving Barclays

Mike Mazzei, the dean of commercial MBS executives, is moving on.

Mazzei has resigned as co-head of global real estate capital markets at Barclays, effective in late August. His fellow co-head and longtime colleague, Haejin Baek, will assume sole responsibility for the operation.

The exit of Mazzei, one of the best-known commercial real estate dealmakers on Wall Street, adds an exclamation point to what has been a wholesale turnover of the CMBS industry's senior management and the complete dismantling of many major operations.

While he declined to comment on his resignation, Mazzei isn't expected to remain on the sidelines for long. He's believed to be in the growing camp of executives who think the best opportunities lie outside of large financial institutions, which are likely to be hamstrung by capital constraints and increased regulatory scrutiny in the years ahead.

Some other senior CMBS executives have turned to smaller, more nimble enterprises, such as funds backed by deep-pocketed investors or newly formed finance companies that aren't saddled with legacy assets. The buzz is that Mazzei, who is 48, will explore such opportunities.

He joins a lengthy list of senior CMBS executives who have left their firms or transferred to other departments over the past few years as the market imploded, resulting in huge losses. Indeed, the top securitization executives at all but a handful of major lenders have departed. That roster includes John Westerfield of Morgan Stanley; Rob Verrone and Bill Green of Wachovia; Mark Walsh and Ken Cohen of Lehman Brothers; Steve Kantor and Rob Brennan of Credit Suisse; Mark Finerman and Perry Gershon of RBS; Brian Harris of UBS; Randy Reiff and Chris Hoeffel of Bear Stearns; and Jeffrey Fastov and Leo Huang of Goldman Sachs.

Mazzei's resignation carries some extra symbolism in that he may be the CMBS market's longest-tenured executive and can lay claim to being one of the sector's architects. He worked at Lehman in the late 1980s when the first seeds of the market were planted. About the only other executive still at a major bank who held a senior CMBS post dating back to the same period is Paul Vanderslice, co-head of U.S. CMBS at Citigroup.

Mazzei, who joined Lehman in 1984, moved into the commercial real estate department two years later. His prominence grew as he helped build Lehman into a CMBS powerhouse.

In the early 1990s, Lehman was one of the first investment banks to underwrite securitizations for Resolution Trust Corp. That activity created a foundation that jumpstarted the CMBS market. With the commercial real estate sector mired in a deep slump and mortgage financing virtually unavailable, a few visionary Wall Street firms saw securitization as a way to bring a new source of capital to credit-squeezed property owners.

The charge was led by a few pioneers, including Mazzei, then head of Lehman's CMBS group, Westerfield of Morgan Stanley, Ethan Penner of Nomura and Andy Stone of Daiwa Securities and, later, Credit Suisse. The firms amassed loans for securitization and reaped small fortunes when the concept took hold and investors snapped up the resulting bonds.

At the time, investment banks were well-positioned to step into the void caused by the lending collapse. While commercial banks were saddled with troubled mortgages, investment banks had clean balance sheets and managements willing to take the risks involved with an innovative business.

By contrast, the current downturn has clobbered all major financial institutions. Banks and insurers alike are expected to face tough sledding for a few years, crimping their ability to revitalize the lending market. As a result, many market participants think recovery will be led by small, nimble, well-capitalized operations willing and able to take on more risk.

Under Mazzei, Lehman was the top CMBS underwriter from 1994 to 1998. He subsequently served as co-head of real estate investment banking and ran a reinsurance unit.

Mazzei ended his 20-year run at Lehman in 2004, when he jumped to Barclays to set up a real estate lending operation. He immediately recruited Baek, his former Lehman colleague, and in late 2005 she was named co-head of the group with him.

Barclays' real estate operation grew to roughly 50 people as the bull market raged, but the bank never wrote loans on as large a scale as the major CMBS players. So while it has taken some lumps in the downturn, Barclays has avoided the deep losses suffered by some other firms. But like other shops, it has sharply pared back its staff.

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