Wescom Credit Union recently opened a commercial real estate division, with an emphasis on loans for small-to mid-size apartment buildings.
While many credit unions have avoided commercial lending because of the risks involved, Cathy Duggan, Wescom's senior vice president of lending, said the credit union's research found multi-family residential properties are sound investments.
"The surprising thing when you look at loan statistics is, these loans have very low delinquency and loss rates," she said. "It all depends on the underwriting and having the expertise in real estate analysis."
To get that expertise, Wescom tapped Dean Lambertson to be the new vice president for its commercial real estate division. Lambertson had been vice president at First Regional Bank in nearby Glendale for the past year, and previously was with Community Bank in Pasadena for 17 years. He has been involved in commercial real estate lending since the 1980s.
Lambertson first was hired as a consultant when Wescom was performing its due-diligence prior to launching the new division, Duggan explained.
"He helped us identify opportunities and assess the risks. We came to the conclusion, as part of his consulting, that doing commercial real estate loans is a natural extension of the loans for one- to four-unit apartments we already were doing. We have had requests from our members for some time for loans for apartment buildings with five or more units. This is a good opportunity for Wescom and for our membership."
According to Duggan, with smaller investment properties, a CU evaluates the property, but relies most heavily on the credit worthiness of the borrower. With larger buildings, evaluating the property becomes as important as evaluating the borrower. "You have to look at rents in the area and cash flow," she said.
Lambertson, whose first day at Wescom was April 5, told The Credit Union Journal the local real estate market helps make apartment buildings a solid lending opportunity.
"In Southern California, demand for housing constantly outstrips supply. Because of this, landlords benefit from high occupancy rates and constantly rising rents," he suggested. "We don't see these loans as a significant risk to our loan portfolio."
Added Duggan: "Our focus will be on smaller to mid-size apartment buildings because that's what members have requested. Other types of properties, such as industrial, retail and office buildings, will be evaluated on a case-by-case basis."
Wescom plans to keep the commercial real estate loans on its books and not participate them out, said Lambertson.
