Parkview Financial, a Los Angeles-based private construction lender, is seeing less volatility as lenders and investors come to terms with a series of rate hikes by the Federal Reserve and higher inflation rates.
Although the Federal Reserve last month increased interest rates by 75 basis points and inflation numbers continue to rise, CEO Paul Rahimian is seeing the markets going through a recalibration that is making it easier for lenders and borrowers to move ahead with deals. A key indicator of this is the yield on the 10-year Treasury, which continues to fall.
“Last month, inflation was up and the Federal Reserve increased interest rates again. But the 10-year Treasury actually dropped,” Rahimian said. “That shows you the market now understands and accepts the Fed is going to increase rates to battle inflation but that doesn’t mean that rates need to spike as much they did during the past 90-120 days. We are getting to the point where things are stabilizing.”
The firm, which started lending in 2009, has been an active lender for the past two years after taking a brief pause during the early days of the pandemic. While it has been a bit of a challenge to lend as the market recalibrates, Parkview is focusing on keeping leverage low, adjusting rates as necessary, and thinking long-term.
“We have increased our rates slightly but we have been more focused on leverage and sticking to our fundamentals, making sure every loan is a good loan,” Rahimian said. “But we haven’t stopped originations, which one thing we learned from the pandemic. We see this as a repositioning of the market and, as long as we are focused on the long-term, we are not as concerned about what is happening with interest rates.”
With this in mind, the firm is working to bolster is presence in the Pacific Northwest and recently hired veteran originator Blake Rodgers to open its first office in the region. Rodgers will focus on sourcing and executing commercial bridge and construction loan opportunities and will be based in Seattle.
“If you look at population growth over the past decade, you’ll see cities like Seattle and Portland have had double digit growth and a lack of supply of multifamily, which is an area of focus for us. With Blake, we will see more opportunities than we did previously,” Rahimian said.
As a construction lender active in the market right now, Rahimian believes low leverage points will offer downside protection should valuations drop.
“If we are closing a loan today, we are looking for our borrower to pay us off in 18-24 months and we believe there will be complete stabilization in that amount of time,” Rahimian said.
“We think rates might go up a little, which could change valuations slightly, but we also know we have a heavy cushion. We are closing loans that are generally about 65 percent LTV and we don’t anticipate valuations dropping by 30 percent or 40 percent. When you look at a bridge lender that is lending at 75 or 80 percent LTV, they could be under water if valuations drooped by 20 percent.”