Regional Banks Restricted By Regulations, Proves Prosperous For Emerald Creek Capital
NEW YORK, Sept. 4, 2013 /PRNewswire/ -- What was once an open landscape of potential borrowers and acceptable collateral has turned into an arid desert of rejected applicants and unqualified real estate. After the collapse of Lehman and the credit fallout that ensued, U.S. banks wisely tightened their belts. This was a necessary step to ensuring financial stability within credit markets. Too often borrowers with no cash flows and poor assets received real estate loans they had no chance of repaying. Yet in today's credit world, with an ever increasing regulatory environment we're seeing the pendulum swing the opposite direction, in many cases too far. Qualified sponsors with excellent credit and cash flowing assets are too often being rejected. In the event that a commercial real estate loan is approved, it's taking up to 6 months or more to get to the closing table. Unregulated private commercial lenders have been left to fill the void.
One of these commercial lenders, Emerald Creek Capital ( www.emeraldcreekcapital.com), has seen an annual increase in volume of over 350% since inception in 2009. "Although institutional lending has made progress, we're still seeing a lot of frustrated borrowers," says Mark Bahiri, a Managing Partner at the firm. "When we formed Emerald Creek Capital in 2009, we knew the banking industry along with governmental regulations would overreact." In today's world, if borrowers need to close quickly or don't have strong banking relationships, they often rely on private commercial lenders to fill the gap. One such example was illustrated this summer through Emerald Creek Capital's recent closing in Tulsa, OK. A real estate investment group out of New York went into contract on the Tulsa Promenade, a 900,000 SF regional mall. Even though the mall's occupancy was over 90% including Macy's, Dillards, and Sky Fitness, the sponsor still relied on Emerald Creek Capital for its certainty of execution. "I had over $1,000,000 down non-refundable," says Mike Kohen, the main principal for the Sponsor, "waiting for the banks to approve the loan was just not an option." Emerald Creek Capital approved the commercial loan transaction within two weeks, a feat that would have taken the commercial banks approximately 4-6 months.
Emerald Creek Capital ( www.emeraldcreekcapital.com) prides itself on a rapid response time. "Getting to the closing table fast is what matters most to our borrowers," explains Mark Bahiri. "In the past few months we've closed $28 million in commercial real estate bridge loans, all of them were time of the essence closings." The firm is structured as a private equity fund with both domestic and offshore vehicles. They have an institutional board in place and from a client perspective they operate much like an institutional money manager. "With multiple pools of discretionary capital behind us we can respond to the needs of the marketplace without the governmental red tape that restricts the banking industry," explains Mark Penna, a Managing Partner at Emerald Creek Capital. "We're finance professionals who understand the limitations of the commercial banks." Perhaps surprisingly, their portfolio is largely comprised of what might seem to be conventional loans. Their entire loan book is secured by a senior 1st mortgage position, the average credit score of their borrower is 680, and over 70% of their loans are secured by cash flowing assets.
In this continuously changing financial world, one thing is for certain, as banks continue to navigate an increasingly regulatory environment; non-traditional lenders like Emerald Creek Capital are poised to fill the credit gap.
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