Loan Market Remains Active, Cautious Lenders Sense Opportunities

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Economic uncertainty is changing lending practices, but that doesn’t mean there isn’t financing available for commercial real estate in Los Angeles.

The trick, though, is finding that financing and getting the right terms.

“Whatever underwriting people were using in January and February has clearly changed now,” said Kevin Shannon, co-head of capital markets at Newmark Knight Frank. “The loan terms — they are getting so dramatically different from what they were.”

While some lenders are “afraid to make bad loans,” Shannon added, availability has improved because interest rates are still low at a federal level and smaller regional banks are still writing loans.

“This is an opportunity for us to get out in front of new clients,” said Hamid Hussain, president of real estate and commercial banking at Banc of California.

“We’re in a strong position with our portfolio,” he said. “We are reaching out proactively (about loans) to people who may or may not be existing clients.”

Some companies are even creating new ways to make loans.

Brentwood-based Archway Fund and principals with Oakhurst Advisors of West Los Angeles have recapitalized the fund to create Archway Capital, which will provide short-term, fixed-rate debt between $2 million and $20 million in the form of interest-only loans.

Bobby Khorshidi, president and chief executive of Archway Capital, said the venture had been under discussion for a while.

Archway and Oakhurst, he said, understood that a recession was coming and “wanted to position the company so we no longer relied on originating loans” for individuals and instead controlled the capital.

The group is now loaning to portfolios.“The timing just happened to coincide with Covid,” he said.

But that doesn’t mean Covid-19 has had no impact on the group’s lending practices.

Khorshidi said the company is more conservative when lending on purchases made before Covid-19 because the market has changed but less conservative in lending with purchases made after the market’s recent adjustments.

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The company, he added, is particularly interested in industrial properties and value-add acquisitions.