Brzeski: We maintain a portfolio of single-family renovation loans, which is mostly California major urban metros. We are also building a new portfolio that is more focused on multifamily and small-lot subdivisions, and we have done some condominium construction completion loans as well. We are 50% in L.A. County and the remaining balance is spread between San Diego, Bay Area and Orange County. So, our geography is coastal California and major markets. We like to be closer to where the jobs are, because they are going to hold up better when there is a downturn. We focus on small balance, so most of our loans are $5 million and under—and all of our loans need to close within 30 days or less. That is where we can provide the most value because there is some sort of development or renovation component. Any loan in these geographies with a residential component and that has a time sensitivity to close is a loan where we can excel.

GlobeSt.com: Are you concerned about overbuilding?

Brzeski: We do, but we think that it is situation specific. For example, very high end, luxury properties have had a lot of development. We like properties that are in more affordable markets and more affordable price points. We have been doing B and C properties that are in B and C locations, but strong locations. That is really on the renovation side. Most people in L.A. are more comfortable living in a smaller building, and we tend to fund the borrowers that develop smaller projects. We think that people would prefer to have a little less square footage and be close to where they work versus having a big house, but having to commute an hour to work. We are betting on the fact that housing is shifting to urban, smaller projects close to the best jobs. The supply of that type of product is so supply constrained because is hard to deliver the product. We are trying to avoid high price points. We are trying to stay focused on middle workforce housing price points.

LOS ANGELES—In the last year, banks have tightened construction loans because of fears about overbuilding. Not all lenders, however, are following suit. Arixa Capital is only lending on residential construction projects. To find out more about why the firm is so bullish on multifamily construction and what types of properties that they are focused on, we sat down with Jan Brzeski, managing director and CIO at Arixa Capital, for an exclusive interview.

GlobeSt.com: Why are you focused on multifamily construction loans, specifically?

Brzeski: We started out lending to people that were buying foreclosed houses after the financial crisis hit. They were buying those houses, fixing them up and selling them. I started making these loans in 2009, and started the first fund in 2010. To some extent, we have just followed our borrowers, because following the financial crisis, many big established developers were sidelined because they had gotten too aggressive and they had to fix their own portfolios. A wave of young developers got started in 2009 and 2010, and we are following those clients as they have evolved their businesses from buying the foreclosed house for a few hundred thousand, fixing it and reselling it to, in more recent years, focusing on more construction-related projects that are still single-family to now, where the borrowers are building a small-lot subdivision or buying multifamily to redevelop inside and out and then refinancing it and holding. We are doing a lot more residential-oriented multifamily and multi-unit for-sale housing, but still with an urban infill focus. It so happens that as our developer community of clients has evolved to do more of these projects, it has also become clear that there is a need for more and better housing in these infill locations. There is a convergence of reasons why we are positioning to fill this need.

GlobeSt.com: What is your typical property profile, and do you continue to loans on multifamily and single-family?

Brzeski: We maintain a portfolio of single-family renovation loans, which is mostly California major urban metros. We are also building a new portfolio that is more focused on multifamily and small-lot subdivisions, and we have done some condominium construction completion loans as well. We are 50% in L.A. County and the remaining balance is spread between San Diego, Bay Area and Orange County. So, our geography is coastal California and major markets. We like to be closer to where the jobs are, because they are going to hold up better when there is a downturn. We focus on small balance, so most of our loans are $5 million and under—and all of our loans need to close within 30 days or less. That is where we can provide the most value because there is some sort of development or renovation component. Any loan in these geographies with a residential component and that has a time sensitivity to close is a loan where we can excel.

GlobeSt.com: Are you concerned about overbuilding?

Brzeski: We do, but we think that it is situation specific. For example, very high end, luxury properties have had a lot of development. We like properties that are in more affordable markets and more affordable price points. We have been doing B and C properties that are in B and C locations, but strong locations. That is really on the renovation side. Most people in L.A. are more comfortable living in a smaller building, and we tend to fund the borrowers that develop smaller projects. We think that people would prefer to have a little less square footage and be close to where they work versus having a big house, but having to commute an hour to work. We are betting on the fact that housing is shifting to urban, smaller projects close to the best jobs. The supply of that type of product is so supply constrained because is hard to deliver the product. We are trying to avoid high price points. We are trying to stay focused on middle workforce housing price points.