Spring Garden Lending, the provider of bridge financing to local real estate developers
led by former Valley Green Bank CEO Jay Goldstein, is entering uncharted territory with
a longer term fixed rate financing product.
Called Permanent Plus, the new loans offer up to 30-year fixed rate financing for real
estate developers working on single family homes with one to four units and multifamily
homes of five to eight units. Goldstein said the loan program will most likely top out at
16 to 20 homes per project, though a borrower could take out more than one loan at the
same time. The high-water mark would most likely be around $5 million per loan.
“This allows us to leverage existing relationships with clients and offer them a new
product as well as attract new clients who hadn’t worked with us before,” Goldstein said.
Goldstein admitted that the certainty of a 30-year fixed loan comes with higher interest
rates about 0.5% more than the 4.5% to 5% a developer could get at a bank.
Most banks offer fixed rates for five years and then it comes for renewal for another five
years. Spring Garden is offering 30-year fixed financing product with the help of
Chicago-based servicer Renovo Financial and an unnamed Wall Street investment firm
that finances them.
“We thought this was the best way to go, rather than reselling them to some company
that we don’t have a relationship with,” Goldstein said. “From a customer service
standpoint, we feel better knowing they are being serviced by a familiar company.”
The new product will not require hiring new lenders. It just provides Spring Garden’s
existing lenders in Philadelphia, Baltimore, Washington and Lancaster another product
to sell in addition to its bridge financing.
Goldstein said there was an “overwhelming response” from customers when Permanent
Plus was unveiled last week.
Spring Garden, formed in 2016, produces $100 million in loans annually and Goldstein
said Permanent Plus should increase that by 25% to 50%.
Headquartered at 9th and Spring Garden streets in Philadelphia, the company caters to
local developers who need short lead-times to take advantage of investment
opportunities but do not want to turn to expensive non-bank lenders. Spring Garden
creates its profit by charging about 8% interest on the bridge financing — higher than
the 4% to 6% charged by banks but lower than the 12% to 15% at alternative lenders.
Goldstein said the difference in working with Spring Garden as opposed to a bank is that
the loans close within three weeks of approval, whereas bank loans can take up to four
months to close.
Once the projects are completed, borrowers either sell or rent the properties. Most local
projects are in growing city neighborhoods like Fishtown, Fairmount, Brewerytown and
Passyunk. Spring Garden expanded into Baltimore in 2018, Washington, D.C., in 2019
and Lancaster last year.
The company earned roughly $1.5 million in both 2018 and 2019, and Goldstein said it
was profitable once again in 2020 despite the Covid-19 pandemic.