How a private mortgage lender works with CRE clients when credit is tight

Investors and borrowers in the commercial real estate sector, concerned about current economic events, are asking two questions: where is the economy going and where to find financing at a time when certain important sources of credit are not available?

Noah Streit, director of private mortgage company Streit Lending, understands where these borrowers are coming from.

“There’s this weird situation at the macro level where you have two opposing forces acting on the economy,” he said. “You have the executive and legislative powers pushing the money. And then you have the Fed, trying to cut supply and raise interest rates. They don’t work in concert with each other for many reasons, and I don’t think we’ve had a chance to really see the macro effects of the crunch versus printing extra money.

But while the direction of the economy remains uncertain, many potential borrowers are seeing a very tangible impact from these forces. They struggle to find funding for their projects.

“Anecdotally, from what we’ve heard, and also based on our business, it appears that many sources of capital credit are slowly drying up,” said Auriel Streit, member of the general management of Streit Lending. . team, along with his brother Noah Streit and his sister Nava Streit Raziel.

Where does that leave a developer or property owner, especially one looking for a bridge loan or construction loan in the $500,000 to $10M Streit Lending sweet spot?

The good news, Noah Streit said, is that Streit Lending has a strong focus on CRE segments which continue to perform well.

“We’re still relatively bullish on multifamily,” he said. “More multi-family housing is needed because there is a lack of housing, especially in California, which is our goal.”

Industrial businesses, especially around Los Angeles, and strategically located retail businesses also look great, Streit added.

Even the office segment, which continues to struggle in California and beyond, and is not a current area of ​​focus for Streit, holds promise for patient investors and developers, Noah Streit said. He expects the work-from-home trend to wane once the unemployment rate starts to rise somewhat, which is seen as a unspoken goal recent actions by the Fed to raise interest rates.

“If you’re into the office then this is the biggest no-brainer time to get in because prices have come down,” he said. “And you would be buying on existing caps on existing revenue streams, which are well below historical averages and occupancy levels that are just below historical averages. I think there are huge opportunities in the office at long term.

In the shorter term, many borrowers looking to finance a building purchase or construction work might be better served by working with a small private lender rather than a large bank, the Streits said.

“Banks have always been notoriously difficult to close deals, sometimes keeping you waiting for months,” said Noah Streit. “But often with our borrowers, they only have 20 or 30 days to close. You just wouldn’t be able to do that kind of deal with the banks, who in today’s market are backing away left and right on deals and their underwriting times have increased as well.

Streit Lending, on the other hand, can process a loan in weeks rather than months, offering interest rates starting at 7.99% for bridging loans and 8.5% for project loans. construction and for distribution or retail centers in the California cannabis space.

“The biggest distinction between us and the banks is that there’s no black box here in terms of who you deal with,” Auriel Streit said. “And although there is a loan committee, usually there are only three of us, so there is a lot less misunderstanding and confusion about the underwriting process.”

Streit Lending uses the financial strength and liquidity of the Streit family to give borrowers direct access to private capital. The company has originated more than $500 million in loans since launching its lending business in 2012.

“It means there’s more certainty of proximity,” Noah Streit said. “And we can also be more creative in certain circumstances than other lenders might be because we’re not beholden to investors.”

But perhaps the biggest distinction between Streit Lending and other CRE lenders is that it understands where its borrowers are coming from.

The company was founded by the directors’ parents in the 1970s as a multi-family investment company and to this day owns and operates its own multi-family properties. The Streits said this means they understand the opportunities and challenges their clients face.

“We like to think of our relationship with our borrowers more as a partnership than just a debtor-lender relationship,” said Noah Streit. “And between the three of us, we bring a substantial amount of real estate knowledge to the table in terms of advice and guidance, particularly when going through the due diligence phase with a borrower.”

At a time when the economy is behaving oddly, he says, customers appreciate a family approach.

“We have a great relationship with our borrowers and we all really appreciate being able to interact with them as partners,” said Noah Streit.

This article was produced in collaboration between Studio B and Street loan. Bisnow press staff were not involved in the production of this content.

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