Serving the Underserved Borrower

NEW YORK CITY-The phrase “a tale of two markets” is among the most frequently deployed to describe everything from today’s investment sales climate to the leasing recovery that thus far has favored just a handful of gateway cities. Ask Ryan Freedman, chairman and CEO of Corigin, and he’ll tell you it applies to real estate financing as well.

“We’re seeing a lot of the same circumstances that you saw a year ago; it’s still out there,” Freedman tells GlobeSt.com. “It’s taken longer for a lot of the smaller pieces to get worked through the system.” However, he says, lenders are focusing on “core assets and stronger borrowers” in the aftermath of the financial crisis.

To address the concerns of commercial and multifamily operators who may not be looking at a $250-million default but nonetheless require financing, Corigin last week announced that it has initiated a new lending division as part of its real estate group. Headed by Gregory Gleason, formerly of Credit Suisse Private Equity, Corigin Lending focuses on short-term debt financing of $1 million to $20 million for New York metropolitan area properties.

The circumstances that might bring borrowers to Corigin run the gamut. For example, “We’ve seen a borrower with the opportunity to buy out his bank,” Freedman says. “We were able to finance that deal and give a little extra money to finish construction on an in-place project.”

In another instance, the borrower “had a cash need in their investment portfolio—in their core business, not with their real estate holdings,” says Freedman. “They brought their real estate holdings to us in order to provide liquidity because the economic cycle we went through created a constraint within their operating business.” Regardless of the circumstances, he says,  “We’re seeing those types of borrowers, and the need is not being met by the traditional banking services that previously would have met these needs.”

A spinoff of international real estate firm Coalco that launched this past September, Corigin deploys its own capital base as a direct lender, and draws on in-house real estate knowledge to bolster its underwriting. “We’re looking at the asset that we’re lending upon,” Freedman says. “If a borrower has issues in their business, hopefully this cash can help them. We’re not going to look upon that as a reason not to lend to them. The real estate is the real estate, and we understand it and underwrite it that way,” he adds.

Naturally, transactions vary in complexity. “The easiest, quickest deal obviously is a straight cash flow transaction,” says Freedman. “We’ve done a transaction where the cash flow was there, but there were also air rights available and the site was being set up for a development site. So we were able to value it both ways and make that deal happen." At the other end of the spectrum is construction financing, and there the Corigin team draws on in-house knowledge of construction, development, architecture and engineering to assess what has spent thus far and how much more needs to be spent.

If lenders favor stronger borrowers generally, Freedman says, then the truism applies tenfold when talking about construction deals. “The bigger, better borrowers can get the relationship construction lending” at the moment, Freedman says.

He predicts that eventually the market will start to loosen up and you’ll begin to see some competition among lenders in this area. “But we’re not there,” he adds. “The door is just starting to crack open a tiny bit for construction financing.”