Fidelity Bancorp launches construction lending platform

The alternative lender has hired John Omori from Bank of Hope to spearhead the initiative, which will focus on smaller, local builders in the multifamily sector.

Fidelity Bancorp Funding, a Santa Ana, California-based alternative lender, has launched a construction lending platform, an initiative that John Omori from Bank of Hope will spearhead. 

The hire comes a month after the firm brought on Charlie Woo from San Franciso-based Wells Fargo as president of its bridge lending platform with a mandate to spearhead an initiative to grow loan originations and borrower relationships. 

A key part of this will be construction lending, which has faced the same difficulty as other parts of the financing markets. The slow down in lending has meant there are sponsors seeking financing to complete or start work on projects who are finding themselves without viable lending options, Omori explained.

“Some of the loans we will be doing will be bridge loan situations or situations in which a client needs more funds for project overruns,” Omari said. “We could also work with borrowers who are looking to reposition a property, either something they owned or an opportunistic purchase where there is some upside potential. Also, we are interested in a limited basis in ground-up construction deals.” 

The firm will focus on smaller, local builders in the multifamily sector. “The large, institutional builders, both on the residential and multifamily side, will always get their capital. We are focused on the borrowers who are building projects that are 50-75 units. These loans are getting done, just at a much slower pace,” he added.  

“On the residential side, the large institutional builders will always get their capital. What we are focused on over here are the smaller, local builders – the borrowers who are building smaller projects that are less than 50-75 units on a multifamily project. We are still hearing there are loans getting done, but at a much slower pace,” he said.  

Omori also cited the demographics of the opportunity in the multifamily sector, noting there continues to be a housing shortage. 

“MLS resale listings are at 20-year lows. Rental occupancy is still strong in many markets, especially California.  First time buyers need housing. Current homeowners are not moving because they do not want to part with their 2-3 percent interest rate loans. Local small to mid-size scale developers producing rental inventory or speculative housing have had their typical capital financing resources withdrawn from the market. We believe the construction business will remain strong despite an uncertain economy, and are expanding our focus to provide capital to developers to execute their plans,” he added. 

Omori said Fidelity Bancorp believes that as banks continue to grapple with balance sheet issues, there will be a significant opportunity for alternative lenders. 

“Traditional lending sources, like the banks, are frozen right now. They have their own issues, unlike the last downturn they are dealing more with a balance sheet issue where the flight of deposits from their customers makes it difficult to have the capacity to provide answers to people need construction or bridge loans,” Omori said. “We think there is going to be a large opening for alternative lending or private lending out there, especially for the borrowers with good projects who are experienced and have good track records.” 

For better or for worse, Fidelity’s outlook is that banks will not have an appetite for lending for the near- to medium-term. “It is still early innings for alternative lenders,” Omori said.