Since Jeff Friedman co-founded Mesa West Capital in 2004, almost everything has changed for the West L.A. commercial real estate lender from its business model to its competition.
The days of doing deals with 75 percent loan-to-value ratios are long gone. So are the competitors, who have been driven to the sidelines or out of the business by the global recession. Indeed, Friedman's company, backed by investments from public pension funds, is one of the few private lenders doing deals.
That Friedman, 47, is still able to make loans is a testament to the foresight he exhibited when the commercial real estate lending business went into overdrive. Friedman watched as real estate values soared and loan-to-value ratios spiraled up to around 90 percent. It didn't feel right.
"Our views were contrary to the popular belief that there was systematic change in real estate values and leverage," said Friedman, who co-founded his company with Mark Zytko, a former colleague at financial services company Credit Suisse First Boston. "The way we adjusted to it was by not participating at the same level of most our competitors."
The decision proved to be a smart one; when the market collapsed, Mesa West was less exposed to bad loans.
The company's first $207 million fund, which it leveraged up to $1 billion using credit lines with commercial and investment banks, was invested from 2005 to 2007. Friedman said that the fund is still marginally exposed to the collapse. The company owns four properties through foreclosure and also is doing "a ton of workouts" to restructure loan terms.
Still, the company has begun lending from a second fund of about $420 million, which has a total of $1.5 billion in lending capacity.
The company generally makes loans of $10 million to $50 million with interest rates of 8 percent to 10 percent on only about 60 percent to 65 percent of a property's underlying value. Both funds have focused on short-term, first mortgage bridge loans on performing office, multifamily, retail, industrial and hospitality projects.
Friedman is used to difficult situations. In 2000, after his stint with Credit Suisse First Boston in New York, the L.A. native and UCLA graduate moved back home to work for L.A. real estate developer Robert Maguire.
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