Added Service
A regional company such as Dominion competes on service when it can’t offer rates as low as Colony or Dwell Finance, Lewis said.
“We’re closer to the ground so we can lend higher loan-to- value and lend it faster,” he said. “If someone calls on Monday, they can be preapproved and funded on Friday. Institutional guys can’t do that.”
Borrowers such as Alex Sifakis, president of Jacksonville, Florida-based JWB Real Estate Capital, are willing to pay more for greater leverage. His firm buys about 40 homes a month and sells half, keeping the rest for rentals.
Dominion gives JWB 90 percent of the home’s purchase price and 100 percent of rehab costs, he said. That compares with 85 percent of both purchases and renovation it gets from lines of credit with institutional lenders, including Genesis Capital, which comes at 9 percent interest rates and two points. Los Angeles-based Oaktree Capital Group LLC invested $100 million in Genesis in January 2014.
“It’s a great thing to have more and cheaper money in the space,” Sifakis said. “It will cause some of these guys charging 14 percent and 4 points to lose a lot of business.”
‘National Platform’
Blackstone’s B2R is focusing on more established borrowers like Sifakis, to whom they extend loans that look more like lines of credit that average $1 million and go to as high as $100 million, with assets cross-collateralized. Rates are as low as 8 percent and one point. The firm also built a technology platform to make the application process faster.
“This is a sizeable and timely opportunity to institutionalize and consolidate an asset class that’s always been a localized business,” B2R’s Gould said at a real estate conference in Miami last month. “There hasn’t been a national platform that has the capacity to lend to this space.”