California-based commercial lender Jan Brzeski counts himself as an optimist. As his company’s chief investment officer, however, he also has been planning for the worst-case scenario.
Over the next two years, Brzeski said there could be a sharp downturn in the multifamily market in the high-priced West Coast market. His company, Arixa Capital, funds deals in cities along the coast that have high wages and strong job markets.
Arixa tends to attract more conservative borrowers that don’t need high-leverage loans. The nonbank lender also is already looking ahead to serve investors who may swoop into the apartment market after the next downturn.
“We are aggregating capital for opportunistic investors as well, so we can provide our borrowers with financing in case there is a steep downturn,” Brzeski said. “That is a scenario that we absolutely think is possible.”
Brzeski cited two worrisome areas for the multifamily market on the West Coast. Rental rates have shot up, which could prove to be unsustainable. The competition among lenders to make loans also is “intense,” he said. Many lenders are taking more risks and approving higher-leveraged loans, he said, a scenario that could put borrowers in a bind if the market turns sharply.
“There are two scenarios, the soft landing and the hard landing,” Brzeski said. “We are preparing for both, and I don’t know which it is going to be.”
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