Read the full Originate Report October edition here.
Arixa Capital, one of the West Coast’s premier private real estate lenders, provides small balance loan solutions to lower-middle market residential and commercial investors and developers. The group was established in 2006 and is led by an experienced team of professionals who together average over 50 years of relevant experience. Since Arixa’s founding, the market has seen incredible highs and seemingly insurmountable lows; Originate Report sat down with Managing Director Greg Hebner to better understand these shifts and the firm’s ground-up construction lending process.
In his capacity as Managing Director and Portfolio Manager at Arixa, Hebner said he is laser-focused on investment strategy, origination, and operations of the firm’s vertically integrated lending platform. From an early age, he added, deal-seeking has been a part of his DNA – an attribute that extends to the entire Arixa team.
“I think one of the attributes that drew me to real estate and lending to begin with was the varied nature of the work,” he said. “Every day, I wake up and am faced with multiple problems that have an equal number of solutions. I think that one virtue I hold dear, and that I see in the team we have in place at Arixa, is that we never sway from championing our clients and seeing projects through to completion in the best way possible.”
One way Arixa has stayed the course of this partnership with clients, Hebner said, is by building (no pun intended) the group’s ground-up construction lending process. On the heels of a pandemic, which the world has not seen in over a century, he added it is paramount to remain at the forefront of trends in lending.
“I think one of the biggest changes we have seen over the past few years is that clients who may have never thought of themselves as ‘builders’ are becoming more involved with that side of real estate,” he said. “That shift is due, of course, to the current shortage of housing supply, but also the desire on the part of borrowers to vary and diversify their portfolios.”
In addition to overseeing the process ‘from scratch,’ Hebner said many clients seek ground-up construction deals because of the flexibility they offer, not to mention the premium that new projects are given in today’s tight housing market.
“When thinking about our lending process, what we’re trying to do is stay in a safe place with the loan relative to the borrower’s equity and the value of the property from the very beginning of a project through completion. What we strive for is a well thought out deal structure that ensures proceeds are available to the borrower; and most importantly, that borrowers have the expertise and capital needed to execute,” he said.
Speaking to this expertise component, Hebner said it is essential to keep in mind that many facets of real estate fall firmly in the ‘walk before you run’ category. Partnering with an experienced lender, he added, can lay the groundwork for a successful relationship.
“I never want to make it sound like we’re discouraging people from entering the space,” he said. “But the fact of the matter is that we’ve seen it all before; we know the red flags to look out for, and we also know the elements that make a deal successful. Some companies may use words like mentoring as filler, but we take that seriously.”
Hebner said he learned early in his career to remain involved throughout a ground-up project to avoid costly mistakes. With the advent of technologically focused tools for developers, he added, borrowers and lenders can have a more holistic view of a project at any stage.
In the wake of the 2008-9 financial crisis, Arixa started its first fund dedicated to making small-balance, short-maturity real estate loans to developers who purchased homes from banks and foreclosure sales; Hebner said this focus – on capital preservation and mitigating risk in every investment – is central to Arixa’s identity.
“What we are trying to do, and have been successful in establishing so far, is a level of humanity and relationship building that I think you’ll be hard-pressed to find elsewhere in our industry,” he said. “I’ll be the first to admit that there are lots of people out there who do what we do, so we’re breaking through a crowded space by uniquely approaching deal structures and ensuring that we focus on each client’s success and making them feel as if they’re the only person we are working within every interaction with us.”
For more information about Arixa Capital, visit https://www.arixacapital.com.