Riaz Taplin’s relationship with First Republic Bank predates his career in real estate. His family’s real estate business was a client of the bank for more than 30 years, shortly after it was founded in San Francisco.
Taplin, the owner of Oakland-based Riaz Capital residential development company, took out his first construction loan at First Republic when he was 25 years old. He has worked with the First Republic banker on 50 construction loans since then.
The news that First Republic was seized and sold by JPMorgan Chase & Co. to JPMorgan Chase & Co.
He said, "My family has had a relationship with First Republic for over 35 years." "I did every single construction loan with them. They made it easier for me when I had less of a platform. It's difficult to imagine that anything could replace it.
First Republic is the Bay Area's largest regional bank and the third-largest overall, based on deposits. It has been an important part of the Bay Area's real estate financing chain since the early 1990s.
Ken Rosen, the chairman of Berkeley Haas Fisher Center for Real Estate and Urban Economics, explained that First Republic was widely believed to have a better understanding of Bay Area development than the banks "too large to fail". Many of these banks were not interested in financing projects.
According to regulatory filings from the end of 2016, First Republic had $2.1billion in multifamily and construction loans for commercial properties on its books. The average loan commitment was $8m. The company also reported loans of $21.6 billion, and $100.8 billion secured by commercial and multifamily properties.
Rosen stated that JP Morgan is likely still mulling over its plans for First Republic’s construction and land loan business. He told me that it is possible for JP Morgan to try to fill First Republic’s shoes in this sector. However, the bank would likely tighten its lending standards if they did.
Rosen added that this will be a major blow to the area's developers. The question is, 'How much less?
Taplin stated that he believed what happened to First Republic will likely have a negative impact on housing production across the Bay Area. He said that rents had declined and, when combined with rising construction costs, interest rate increases, and now the changed lending environment, it didn't create a very favorable equation for developers. He added that Riaz Capital has other banking relationships but First Republic is its anchor lender.
Taplin said that he was open to staying a JP Morgan customer, but expressed some skepticism about the bank's ability to understand his business like First Republic. Taplin said he had a good relationship with his banker and that if the situation could remain'more or a little the same', i.e. the same people, same relationships, same lending options, Riaz Capital will stay.
If it is like: "We can't make this happen. We can't. We can't. We can't. He said, 'I have to go somewhere where they can do everything we need.
Riaz Capital, for example, has a problem in that they don't know where else to look. Nathan George, co-founder of Berkeley residential development company NX Ventures said that his firm will have to refinance its existing land loans from First Republic this year. He is now thinking about who and how to do that.
George wrote: 'We are not in panic, but we would rather focus on other things.' He claimed that the disappearance of First Republic would result in higher rates and more frictions within housing production.
George, whose company is in the process of looking for new lending partners, told me that his broker advised him to start searching for a 'new relationship bank'. This person, according to George, would be able move as quickly as NX while still maintaining transparency and reliability. He said that no one in the Bay Area fits this description at least not yet.
George wrote: 'I told it to him that I was frustrated because I felt FRB was my soulmate. And now I am a widower and back on the dating market.
First Republic has provided a $100-million credit facility to the San Francisco Housing Accelerator Fund. This fund invests in housing preservation, development and improvement in the city. It will provide loans in 2020 for the purchase of new affordable housing and existing buildings. The fund has invested more than $65 million in San Francisco projects.
Rebecca Foster, the CEO of the fund said: "We have relationships and I believe there is something special about a local bank." The fund also has a lot of real estate expertise, which is a rare combination. We are also super sad because their foundation has provided us grant funding. Foster said that they are also lenders to many other nonprofits whose accelerator funds touch. We will work with the First Republic team to determine what the next steps are for potential pipeline projects.
Jesse Blout is a principal of the San Francisco-based development firm Strada. He said regional banks are important in providing permanent and construction financing for real estate. He said that when a large, powerful lender leaves the market - although we do not know what JPMorgan will ultimately do in the long run - it can leave a gap. Regional banks are better at knowing their local market than national banks, and have stronger relationships with local real estate developers and owners. No matter the circumstances, a large bank taking over a small bank can change those relationships and lead to a reduction in lending. Blout stated that Strada has itself considered lending money to others in certain instances.
We've examined whether we could provide debt financing for certain situations, especially multifamily. He said, 'I never imagined that I would find myself in this situation before -- I am usually the one who is looking for a mortgage.' I think this speaks to the fact there is a shortage of loans in the market, especially for anything that isn't a simple situation.