'We're seeing a lot of people build their portfolios now'
Expansion-minded lender RCN Capital has opened a new office in Los Angeles as it moves to gain market share on the West Coast despite market challenges that have beset the industry.
Eric Shaw, RCN Capital’s lead loan officer and head of the new L.A. office, spoke to Mortgage Professional America about the bank’s latest expansion, which complements the company’s South Windsor, Conn. headquarters and a satellite office in Charlotte, N.C. that opened in 2021. Despite market challenges, the lender has outlined ambitious plans this year and projects $1.7 billion in originations for 2023. Company officials noted the company posted a milestone in February as it passed the mark of 20,000 loans originated since its inception.
The happy faces of employees seen at the recent ribbon-cutting for the new L.A. digs belie the challenges Shaw had in finding the perfect site for the West Coast office – efforts that had to be negotiated around the COVID-19 epidemic.
“RCN Capital began in the ashes of financial crisis in 2010,” he noted in reference to the Great Recession that emerged three years prior. “During COVID, I spoke to our CEO because he wanted to expand. RCN is a national lender, and we’ve been lending nationally for years now but we really wanted to have a presence on the West Coast.”
RCN provides commercial loans for the purchase or refinance of non-owner occupied residential properties. The company specializes in new construction financing, short-term fix-and-flip and bridge financing as well as long-term rental financing for real estate investors.
Read more: What are the different types of bridge financing?
From temporary workspace to shiny new offices
Shaw was no stranger to hurdles, personally, describing his working conditions when he first joined RCN Capital. “I started with RCN not quite three years ago, grew the team and, because of COVID, work-from-home turned to temporary workspace at a Regus facility – like a WeWork kind of an operation. We did that for about a year while I searched locations and signed a lease. We just moved everybody officially a couple of days ago, but a month or so ago was when we were really full-bore out there.”
While the company has previously originated loans in California – RCN lends in 45 states – the decision to open a bricks-and-mortar office was based on a need to have a firm foothold on the West Coast, Shaw said. “RCN realized that to push loans out here, it would be helpful to have boots on the ground, have people in this time zone who understand the market and speak the language, those kinds of things. So that’s really what’s been the impetus.”
Go West, young firm
Shaw acknowledged the current challenges in the market but disabused the notion of it being counterintuitive to open a physical presence amid such market uncertainty. “Obviously, there are challenges,” he said. “Rates were very, very low for a very long period of time – probably too long. The Fed is obviously responding, and we’re feeling it along with everyone else. It’s been interesting to see how opportunistic investors are and how quick to take advantage of opportunities as they come,” he said. “We’ve certainly seen some pivoting from the fix-and-flip world where, during COVID, you could buy property and do nothing to it and then three months later sell it for X percent more and make money on it.
“That of course is slowing down a bit. But on the debt service side of things, on these long-term rental loans where a lot of investors couldn’t turn around and make a capital gains kind of profit, they’re now looking at the buy-and-hold scenarios where they can earn income over time. And so we’re seeing a lot of people build their portfolios now. RCN has been in a position where we’re well-capitalized, and we’re able to step in and offer as low rates as possible so that people can actually make the numbers work.”
Shaw’s career further hints at challenges overcome. Prior to joining RCN Capital, he worked in bonds at Lehman Brothers and IndyMac Bank – “two blasts from the past that are no longer around,” he joked. “I’ve been in the bond trading and bond portfolio management side, but always in mortgages. I decided to kind of move up the assembly line as they say and get into the originations side. I’ve been originating and managing this office, and now we have four loan officers that work on my team. And we’ve got some open recs to expand that and create a pod out here to get a processor and closer to really make it a fully functional team.”
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