(Bloomberg) -- Stephen Scherr, the former chief financial officer of Goldman Sachs Group Inc., is seeking a Wall Street comeback by joining the leadership of one of the biggest investors in US housing.
Scherr starts this week as co-president at Pretium, a major landlord of US single-family homes founded by his former Goldman colleague Don Mullen. The new hire will share his post atop the $55 billion investment firm with another heavyweight Mullen recruited last year: former Morgan Stanley CFO Jon Pruzan.
“The firm has grown extremely fast. I need to be in a position that I have people around me that, if I get hit by a bus, can run the place,” Mullen, 66, said in an interview. “That doesn’t mean that, if I drop dead, they come out of a glass case to run the place. There’s a lot to do now.”
That includes expanding the firm.
“Bringing folks like that on board is going to put us in a position to be able to grow in a reasoned and mature way,” he said. “We are still a tween in our growth path.”
Scherr, 60, spent most of his career at Goldman, including his last three years as finance chief, until 2021. The banker then ran car-rental company Hertz Global Holdings Inc. before stepping down from that role in March as the company teetered from its mistimed bet on electric vehicles.
In joining Pretium, he returns to the familiar turf of finance, this time focusing on a residential real estate market that’s being reshaped by giants. Mullen made a shrewd bet in the aftermath of the US foreclosure crisis, snapping up homes at depressed prices as he walked neighborhoods in California and Arizona.
He has since expanded Pretium, amassing a portfolio of almost 100,000 rental homes and plowing deeper into more corners of real estate. That includes a nascent bet on apartment buildings. For investors, the multifamily market has presented opportunities, as some landlords and their lenders fret over a wave of loan maturities, and as some parts of the country work through a supply glut. Pretium is also in the business of originating and servicing home loans and is looking to bulk up in real estate debt.
Pretium has grown at a moment of deep public frustration over the lack of affordable housing. That’s turned attention — and scorn — toward Wall Street players. Both Republican and Democratic leaders have argued institutional investors are making it tougher for people to buy their first homes.
Large investors have countered by arguing they own only a small percentage of US rental homes and are offering a valuable alternative to buying.
“We should be part of the solution even if we are seen by some as a part of the problem,” Mullen said. He added that Pretium has worked with some mayors to address the housing challenge.
Earlier this year, Mullen agreed to sell a minority stake in his firm to Bennett Goodman’s Hunter Point Capital in a deal to help fund expansion.
Scherr said the ambition is to be “bigger and larger.” While there there are other markets and areas where Pretium can expand, it doesn’t need to stray far from its chief remit.
“The organization understands where it has edge and is quite disciplined in areas of real estate where it can make headway,” he said. “There’s a lot to do there long before we go further afield.”
Scherr will be working alongside Pruzan after the duo spent years at competing banks jostling for investor attention, often presenting public updates on successive days, seeking to talk up their firms’ shares.
“I used to tell my team my second-favorite stock was Morgan Stanley,” Scherr said. “The theory was that it would rub off and help the Goldman Sachs multiple. I think the two of us can coexist pretty well at the same firm.”
Private Credit
Pruzan and Scherr have been friends longer than rivals. As Pruzan was exiting Morgan Stanley, it was Scherr who hooked him up with Pretium.
In fact, the pair were vacationing together last year when the collapse of Silicon Valley Bank set off tumult in US banking. While they no longer have to obsess over banking regulations and valuations, they’re feeling the repercussions of tempered lending at troubled regional banks.
That’s opening up an attractive business line for Pretium, which wants to marry its presence in niche local markets with the ability to also finance homebuilders and developers in those areas.
Construction lending as a percentage of the overall loan portfolio at banks has dropped to 4% from 8% in 2006, according to regulatory data compiled by Pretium. It will lead to only more business for nonbank players, according to Pruzan.
“Banks are becoming less relevant in certain lending spaces,” Pruzan said. “The next private-credit market is going to be around residential real estate. The opportunity set is huge.”
--With assistance from Patrick Clark.
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