Strategic Capital Solutions in a Recalibrating Market with Seth Fisher

Seth Fisher is a Principal and Head of Special Situations at Prime Finance and a member of the firm’s Special Situations Investment Committee. He is responsible for investment, portfolio construction, and asset management activity for the strategy, which Prime now refers to as Strategic Capital Solutions.

Prior to joining Prime Finance, Seth was Chief Investment Officer of Equity Investments for Starwood Property Trust’s REIS segment, where he led middle-market investment activity tied to CMBS exposure and commercial real estate special situations. Earlier in his career, he held roles across predecessor business lines at LNR Property, including credit investment activities, note sales, and loan workouts. Seth graduated from the Wharton School at the University of Pennsylvania with a B.S. in Economics.

Insights from Seth Fisher on Strategic Capital Solutions

A borrower may need a stretched senior loan, preferred equity, mezzanine debt, structured equity, or another capital solution altogether. For Seth Fisher and the team at Prime Finance, the advantage is being able to match the capital structure to the sponsor, the asset, and the situation.

That flexibility matters in a market where commercial real estate capital structures are still recalibrating for a normalized rate environment. Banks are being more strategic with capital, borrowers are hesitant to lock into long-term fixed-rate debt, and private credit is playing a larger role in how real estate borrowers solve for flexibility. Prime’s rebrand from Special Situations to Strategic Capital Solutions reflects a business that includes secondary loan acquisitions and partnership capital for complex situations.

In this episode of The Dealmakers’ Edge, Aaron Strauss and Seth Fisher discuss how today’s recapitalization environment is shaping private credit, why Prime shifted from Special Situations to Strategic Capital Solutions, how flexible capital solutions are structured in practice, and why repeat relationships remain central to deal flow, credibility, and execution in commercial real estate.

1:53 - Learning real estate basics in industrial brokerage

3:15 - How the GFC shaped Seth’s view of risk and downside protection

4:14 - Building the three legs of special situations investing

6:31 - Moving back to Chicago and joining Prime Finance

7:57 - Strategic Capital Solutions and the specialized platform model

10:27 - The current era of recapitalization

16:58 - Rebranding from Special Situations to Strategic Capital Solutions

21:18 - Building relationships before you need them

23:18 - Managing stress by breaking problems into smaller pieces

Mentioned In Strategic Capital Solutions in a Recalibrating Market with Seth Fisher

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Seth Fisher on LinkedIn

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Transcript

Aaron Strauss: You're listening to The Dealmakers’ Edge with A.Y. Strauss, diving deep into stories behind commercial real estate leaders. 

Hello, everyone. Welcome to The Dealmakers’ Edge. Today we have a fantastic guest, Seth Fisher, who's principal and a member of the Special Situations Investment Committee at Prime Finance. Seth is going to walk us through his exciting career, how he's navigated through cycles, what he sees in this market and how the critical aspect is managing great relationships throughout any cycle and any opportunity. It's a fabulous conversation and hopefully you enjoy it. 

Seth, I know you've done a ton in your career and you're super busy juggling so many items day to day, but I'd love to go back a little bit to where you grew up. I know you went to school at U of Penn. You graduated about 20 years now at this point. Maybe you could walk us through the earlier days and how you got started in your career and then we'll let the story kind of unfold from there. 

Seth Fisher: So I was born and raised in a small town, in southeast Iowa. I think I was one of only one or two people in my graduating class who left the state for college. So going to the University of Pennsylvania in Philadelphia was certainly a big change and something I was excited about. I got to play football there for four years, which was a ton of fun. Fortunate to be on some great teams and forge some lifelong friendships there. Graduated from the Wharton School with a degree in economics in 2005. After graduation, I stayed in Philly for my first job, which was with a local brokerage and advisory firm focused on industrial real estate, along with some corporate facilities, consulting for some pharmaceutical companies in the region. Like a lot of first jobs, that is where I just learned how to work, gave me a grounding in the basics of real estate, the bricks and sticks, the supply and demand, et cetera and also had some exposure to the sales side of the business. So I learned the importance of relationships and communication early on. A few years later, the global financial crisis was upon us. Transaction activity effectively ground to a halt. So I needed to find a place where there was work to do. And that led me to Miami and to a place called L&R Property. L&R was one of the pioneers in the CMBS space, remains one of the largest special servicers out there today. At that point, the company had a very large legacy CMBS portfolio. And when the financial crisis hit, distress, debt and special servicing became sort of the eye of the storm, so to speak. So I found my way into the deep end of a very turbulent commercial real estate market at that time. And looking back, it was just a very, invaluable experience to take away. The scale, complexity, and intensity of that period were unprecedented and was formative for me. I learned what can go wrong with real estate capital structures, before I had experienced everything going right and so that really shaped the way I think about risk, downside protection and alignment in any deal. I spent several years in the loan asset management group, working on loan workouts, restructurings, foreclosures, REO, loan sales and just saw a huge volume of distressed debt deals. Later, Starwood actually acquired L&R. I sort of migrated across the business, wore a number of different hats across credit rolls. And eventually we launched an equity business, focused on acquiring distressed and underperforming assets with a value add strategy. I initially led acquisitions for that business and then ultimately ended up running the business unit. So over the decade plus, between the financial crisis and the pandemic, I sort of gathered experience across workouts, credit, equity investing, which I think of as really the three legs of the stool for special situations investing. And that combination of skills really became the foundation for me to grow my career. 

Aaron Strauss: Amazing. And 2010, those in the business for long enough remember those years fondly. No credit, no movement, massive financial institutions collapsing seemingly overnight. So from 2010 to 2020, you saw, I guess, pretty much everything there really is to see, from the lowest of the low and then the gradual buildup, I guess, from maybe 12, 13, all the way to 20. But what a fabulous exposure for you, frankly, to be in the eye of that storm, especially at L&R and Starwood, who's always been extremely creative of a platform, and to grow into leadership there and to see, frankly, everything from the inside out. It must have been, looking back, it must have been very exciting, but probably pretty scary in the early days of it, too. 

Seth Fisher: It was. You're right. It was a heck of an experience to sort of range the cycle across the bottom to the top and have the exposure to those experiences in between and build my skill set on that track. So a very fortunate and invaluable experience. 

Aaron Strauss: And also, not many athlete scholars around, so congrats on that. Sometimes the athletes stay in their lane and the people who are less athletic stay in their lane, but to have the combo, to play varsity football at an amazing school and those leadership lessons on the field and the friendships, I'm sure those are still helping your career to this day, because those lessons you can't learn in class, so congrats on that too. 

Seth Fisher: Thank you. 

Aaron Strauss: And maybe we'll talk a little bit about how you got to Prime Finance, how you got to where you are today, the opportunity that developed and maybe fast forward to describing the business units you're basically working on day to day at the firm and even maybe at a higher level, for those who have not heard of the company and the firm, maybe you can just describe it on a macro basis. 

Seth Fisher: Well, it's a good segue sort of after a great run in Miami with Starwood and L&R and my kids were getting older. I'm a Midwesterner and it was sort of a natural time for professionally and personally to move on and start the next chapter. And so I moved back to Chicago, really right in the middle of COVID, in the summer of 2020. I was aware of Prime Finance, a former colleague of mine joined the company years prior to, to start one of our other strategies, which I can touch on. And they had the idea to sort of start a special situations strategy and that's how the conversation and introduction happened. And it was very fortunate to be able to put that together and excited to join the firm and launch the strategy on the Prime Finance platform. 

Aaron Strauss: And I know it's a big institution and there's a lot going on and there's a lot of activity. And obviously we can't go into all of it, but maybe on the strategies that you're focused on, you can elaborate a little bit more and then we can try to dig in. 

Seth Fisher: So big picture, we currently operate three strategies on the Prime Finance platform. We're probably best known for our lending business that provides middle market floating rate bridge loans. That business is also a very prolific issuer of commercial real estate CLOs. We also have a CMBS strategy that primarily acquires new issue B pieces in fixed rate conduit pools, which we started in 2016. And our third strategy that I lead, is what we call our Strategic Capital Solutions business, formerly known as Special Situations and that's what I'm responsible for. So each of the three businesses has its own teams, human resources, as well as dedicated capital through a series of closed-end private equity funds that are formed for that specific strategy. I know there's some firms in this space that pool all the capital together and have the same people, sort of invest across all these fronts and products. Our model is more specialized and focused. We think that offers our investors better optionality and enables us to invest more effectively with teams that are constantly engaged on our respective fronts and applying the various micro-disciplines, if you will, while still enabling each strategy to leverage the broader platform. So we think this approach makes the whole greater than the sum of the parts. 

Aaron Strauss: It's certainly extremely logical and makes a ton of sense, especially leveraging the skill set of someone like yourself who's really seen it all from the inside and out and can be a tip of the spear to execute with all your amazing experience. I'm curious, I mean, the market shifted so much. Post-COVID till now, it feels like it's three cycles compressed into five years. But I'm hearing from some people, again, special situations mean a lot of different things to a lot of people. And I know the market is still probably very active with no limit on things for you and your team to transact on. But whenever I get to speak to somebody in your seat, I always want to get a sense from them, kind of like the market cycle a little bit on a macro level. What does this moment in time feel like for you if you had to compare it to other cycles and things we've been through? It feels like, at least from where I sit, there's kind of two winds blowing in the same direction. You're kind of playing offense and defense, and you're probably in the perfect spot to play both. But I'm curious from you, if you see resemblances to prior times? What's exciting for you opportunistically? Do you think the market's in full recovery? Is it still very fractured? I'd love to hear, just because where you sit, you see so much. 

Seth Fisher: Well, I think brain history isn't the same, but it rhymes, that's the saying to some effect. I think that, you know, we compare this situation often internally to the savings and loan crisis, which was really predates my career, but there's certainly some similarities to any, you know, major disruption in the market cycle. I think that what we're dealing with today and how we sort of characterize the market as it's going through this era of recapitalization. And I think to step back a little bit, the opportunity set that we're addressing is really being shaped largely by two related forces. I think regulatory capital management at banks and insurance companies is one. And secondly, just broad-based macro uncertainty, which are driving the continued evolution of private credit as a more mainstream source of capital for real estate borrowers. On the traditional lending side, some banks are still contending with legacy CRE exposure and capital charges for higher risk rated loans that are a drag on their balance sheet efficiency. That does not mean they are closed for business, but it does mean they are being more strategic with their capital and selective on credit, especially when a transaction requires flexibility, transitional execution, or a higher leverage point. And frankly, that is where the market is in general at today. Transitioning from an ultra low interest rate environment to a more normalized rate environment and capital structures broadly are all recalibrating for that. So On one front, that creates opportunities to acquire loans from institutions that want to reduce exposure and improve their balance sheets. At the same time, the rate environment has changed borrower behavior, right? Long-term fixed rate debt is less appealing with 10-year treasuries in the mid-fours with some volatility there to boot. Historically, CMBS was largely a 10-year fixed rate market, but more recently we have seen a greater share of five-year executions, because borrowers are reluctant to lock in today's rate environment for a full decade. So all that uncertainty has increased demand for shorter term floating rate, more flexible capital and private lenders can often provide a more customized solution than conventional capital sources, including more flexible funding mechanics and better prepayment flexibility that enables borrowers to exit, or refinance their deal more opportunistically and just be more nimble with their capital structure in general. So for similar reasons, there was also strong demand from investment grade bond buyers for securities, backed by commercial real estate debt. And banks are arguably better off deploying capital in the repo market, to support and finance private lenders as opposed to directly originating mortgages. So all of those dynamics contribute to really strong supply and demand for our capital and create opportunities on a number of fronts for us to pursue. 

Aaron Strauss: Right. It seems like this moment in time is actually perfect for someone like you to have the capital behind you, the experience of those different markets as discussed and to have, frankly, a ton of uncertainty in the market, a lot of repricing every day. It sounds like every lender has their own story to solve. But I'm curious if you think there's unique opportunities today, versus even two or three years ago and also the whole theme from GFC and beyond was that whole extend and pretend. I don't think the lenders seem to be doing that this go around, but every lender has their own story by their own capital constraints and their investors. But I'm curious if you think at this moment in time, there's perhaps unique opportunities that wouldn't have even been showing themselves a year or two prior. I mean, obviously it's kind of a weird question, but if there's something about this moment that's unique in your view. 

Seth Fisher: Well, I think there has been plenty of extend and pretend in the market over the past few years, but I think that's sort of run its course and there's increasing capitulation, both from borrowers, as well as legacy note holders on what the realistic outcome is for their existing position. I think a lot of that is driven by the hope or expectation that rates were going to fall by now. And that obviously hasn't happened. I think there was maybe a segment of the marketplace that was looking at worse taking office and did not expect us to have the conflict in Iran that's obviously made it even more difficult for a rate cut expectation. And now we're pricing in some rate hikes. So I think those things sort of led to, you know, where we're at today, and that's just increasing capitulation from the market that's finally saying, okay, this is where we're at. This is a normal rate environment. They're probably not going, you know, down any time in the future. And in order to proceed with our business, whether you're a sponsor or a lender, you have to move on. And I think over this period of time, marks have sort of closed the gap with real market value and that's leading to more transactions happening in the market and beginning the recovery phase. 

Aaron Strauss: That's fabulous to hear, especially from somebody in the business of closing deals for clients. We like to see a healthy market moving forward, but also it seems like a lot of the sponsors are playing clean up and fixing old problems, but the ones who transact today at the earlier stage of recovery obviously potentially have a great leg up. I want to ask you another question regarding sourcing opportunities. I'm sure just based on you're at a big institution and there's whole professional sourcing teams and people are coming at you with a lot of different opportunities. I'm curious if you can almost describe a storyline. You know, this is a bar we're coming and there's a maturity and there's a default and there's springing guarantee and there's a timing issue and the loan is underwater. But I'd love to hear maybe somebody listening to this maybe saying, what are we thinking of the firm for? Obviously, bridge lending, et cetera. But what is that story people are coming to? What's a common theme? Because distress is such a wide variety of topics. I'd love to hear some of that, if you don't mind. 

Seth Fisher: Well, I think there's really two parts to our business. One, we are buying a lot of loans in the secondary market and that is often around non-performing, sub-performing loans that have a distressed aspect to them. That's been about half our business historically. The other half of our business is more offensive partnership capital and whether that takes on the form of, you know, stretched senior loans, or preferred equity investments, or mezzanine debt, or some other structured solution. That's a big part of our business is actually why we rebranded the strategy recently from special situations to strategic capital solutions is because, well, two reasons it's more representative of our overall business. And we feel like it sends the message to the marketplace that we're an approachable capital provider and not just focused on distress situations. And so I think to give you an example of more of the partnership format, you know, one of our big advantages that we provide, is our flexibility in terms of how we can craft a capital solution for a particular sponsor in a particular situation. Without getting into too many specifics, we received a capital request for a redevelopment, repositioning deal of a large property in a major market. And throughout that process, we iterated three or four different types of capital solutions for the sponsor, between first mortgage, stretch, mezzanine, some type of preferred equity structure. Eventually we settled on providing an unlevered structured equity solution to the sponsor, which was the best match for them to accomplish their goals with the business plan. It was the best capital structure for the deal overall. And we were able to find a way to participate in co-invest that with that deal alongside the sponsors that created a lot of alignment and, you know, properly capitalize the asset for the long term. And so I think the point I'm trying to make is that having a lot of flexibility on what you can provide a sponsor, instead of being in a box where I can only provide a loan, I can only provide a mezzanine loan, or I only do this kind of equity in this type of property sector or this type of market, we can generate solutions for sponsors through an iterative process and sort of be a one-stop shop there that they can come to in special situations. 

Aaron Strauss: That's a perfect illustration. And you're right. I think people are looking for solutions. And maybe they call their broker who introduces them to a firm that just does preferred equity, or just does MES, or just wants this box. The fact that you can solve across all those food groups with the capital you have behind you and the experience, frankly, you have behind you and the team you have behind you, I think it's an extremely excellent market position to be in and congrats on that place you've gotten to. So the other question I have is a little bit more on the softer side, not relating to markets, but as you mentioned earlier, you know, early in your career, you developed the critical skill set of developing relationships. And as we know in real estate, you can have a ton of brains, you can have a ton of capital, but unless you understand how to foster great relationships, you can't really move so much further ahead. I'd love to hear how relationship development has played a critical role or If you're mentoring somebody junior on your team who's trying to develop their career further, what kind of advice are you giving them? Because this podcast is geared for people who are maybe five to six years out, maybe a little bit junior and they're looking to learn from people who have done things the right way over a longer period of time. 

Seth Fisher: It's a great question. I'll start by saying about half of the business that Prime Finance does as a platform, is done on repeat relationships from counterparties that we've done other transactions with. And we're really proud of that. We think it demonstrates the kind of trust and reliability that we strive to provide to the market and our investors. And at the end of the day, real estate remains a relationship-driven business, in terms of deal flow, information, your credibility, right? And execution all depends on those networks that you build over time. And the best opportunities often come from repeat counterparties who trust that you will be there, that you will be commercial, thoughtful and reliable. And those are among the core values that we have at Prime Finance. I think to give an example, real time, I'm currently working on three different transactions with counterparties on the other side of that deal that are Penn football alumni. So it's sort of a small world. And I've got a Penn football alumni in the middle as my legal counsel. It's a small world and it's always important to invest in those relationships from an early time in your career. Get out there, meet people, even if it's outside of your comfort zone, you know, push yourself to do that, because over years you're going to run into these people. Your peers are going to grow, you know, into more influential roles and 15, 20 years down the line, you're going to start making decisions together and having that connectivity that's going to be really beneficial for you. So it's something that, just like anything, any relationship that it takes time and, and it's different than doing a transaction. You get to spend time with people and build those relationships, even if you don't get anything out of them for a year or two years, five years, that's what relationship building is all about. 

Aaron Strauss: Really well said. And it obviously shows up in your career. I mean, the other question, which is sort of ancillary to that, it's more, we call this podcast The Dealmakers’ Edge. And we try to kind of get into almost a little bit of psychology. I mean, because this is such a stressful business. Every day, you're bombarded. You've got hundreds, if not thousands, of emails. Your team is reporting to you. All of your investors want something, the market is changing, you're doing deals, you have to keep your head on all the time for clear thinking. When you have a very stressful moment, maybe it's a go or no-go decision on a large transaction, which you know in either way will have serious ramifications or repercussions. What kind of self-talk do you undertake, when you have to manage through very choppy waters? I mean, from 2010 to 2020, like we said, you saw multiple cycles of extreme angles. So, I mean, what are you telling yourself on those kind of darkest days to navigate through moments of uncertainty? Because everything's uncertain all the time and I think that thinking that you have, that critical thinking, will really be beneficial for people listening. 

Seth Fisher: You know, I think my dad always told me, nothing's ever as bad or as good as it seems at the moment. So I try to keep that in mind. My process is, usually I try to break things down into small pieces. And that helps me organize my thoughts, find a sequence and priority of what I need to do and then ask the right people for help. Surrounding yourself with the right people on your team 360 degrees is super valuable, having thought partners at the senior level that you can bounce ideas off and and build consensus and is part of my process and something that I, you know, is really valuable for my decision-making process. And how I manage those situations here at Prime is, you know, we've got, you know, co-founders that have owned and controlled the company for 18 years and they're very much engaged with the business and having their insight and support all along the way is super valuable to me. And it translates down through the whole team for us to manage those stressful times. So, I think it's surrounding yourself with good people and having a process that enables you to unpack things and turn big problems into just incremental things that ultimately you're stacking up small things to build big things. 

Aaron Strauss: That's terrific. And listen, I really, really appreciate the time. You're doing some amazing things. I'm sure our listeners would love to be in touch and to hear more about what you're doing day to day. So it means a lot, Seth, that you took the time. I really, really appreciate it so much. And continued success. 

Seth Fisher: It's been a pleasure talking to you. I appreciate you having me on. 

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