Almost two years after selling high performing Mount Airy startup Valley Green Bank for $76 million to Univest Corp., founder and former CEO Jay Goldstein is launching a new venture focused on bridge financing for real estate developers.
Spring Garden Lending Group formally opened for business Monday. It will provide short-term financing — usually between six months to two years — to borrowers who could not get permanent financing. The capital will help real estate developers and investors renovate properties to sell or rent, at which point they could get permanent financing from a conventional bank.
With offices at 9th & Spring Garden streets, the company will cater to local real estate developers who need short lead-times (three to four weeks) to take advantage of investment opportunities, but who do not want to turn to expensive non-bank lenders.
Spring Garden Lending will be able to create profits by charging 8 percent to 9 percent interest — higher than the 4 percent to 6 percent charged by banks but much lower than the 12 percent to 15 percent charged by hard money lenders.
After the Valley Green sale, Goldstein joined Univest as president of the bank’s southern division, which includes Philadelphia as well as portions of Chester, Delaware and Montgomery counties. He extended his one-year contract with Univest for an additional six months and departed in July, at which time he resigned from the bank’s board.
While he respects CEO Jeff Schweitzer and the rest of Univest’s management team, he said once a bank reaches a certain size, the regulatory oversight makes it difficult to make quick decisions on loans to the real estate investors that were the core borrowers for Valley Green.
“We can complete a transaction in four weeks without charging 15 percent interest like some hard money lenders do,” Goldstein said. “These borrowers want speed and certainty. Once a bank gets over $500 million in assets, they get bogged down with the appraisal process and environmental reviews. But we will have more flexibility while also being confident of our underwriting abilities.”
Goldstein said he chose 9th and Spring Garden streets because it is close to where his core clientele conducts business in neighborhoods such as South Philadelphia, University City, Northern Liberties and Fairmount.
Spring Garden Lending will be looking for loans between $100,000 and $2 million, with $500 million being its sweet spot and a focus on residential and mixed use projects.
“The pipeline is robust,” Goldstein said. “We should have $12 million in loans by the end of the year.”
Spring Garden Lending has raised $15 million from Valley Green investors eager to support that management team’s next venture.
Goldstein has assembled a team that includes six former Valley Green employees, including that bank’s former chairman Al Thorell and Chief Lending Officer Peter Bucci, as well as four lenders. Bucci and the lenders also worked with Goldstein at Univest.
Bob Marino, Valley Green’s president who left his executive role at Univest in January to start a consulting firm for financial service companies, will consult on business development matters.
While the departures could be viewed as significant, Goldstein said he believes Univest has been strengthened by therecent acquisition of Fox Chase Bancorp and has a bright future.
Univest Could not be reached for comment. The Souderton-based bank said last week that it would rebrand the locations obtained in the January 2015 Valley Green deal. Those sites had been operating under the Valley Green name since the transaction closed. The two-year transitionary period will soon expire and those sites will take on the Univest’s name next year.