Add Irvine-based Opus Bank to the list of local landlords, developers, land owners and other companies benefiting from the red-hot apartment market of recent years.
Opus, the largest bank based in Orange County, has made a bulk of its loans over the past two years to help finance apartment deals, with multifamily loans now comprising nearly 60% of its loan portfolio.
The bank had $1.7 billion in multifamily residential loans on its books at the end of 2013, according to regulatory filings.
That’s up from about $510 million at the end of 2011, when apartment-related loans comprised nearly a third of its loan portfolio.
Other types of commercial real estate loans—for office buildings, retail centers, industrial facilities, medical facilities and mixed use buildings—make up the second most-active segment of Opus Bank’s lending activities, representing about 15% of its total loan portfolio at the end of 2013.
Single-Family Properties
Loans for single-family properties were about 11% of Opus’ total loan portfolio at the end of 2013. That percentage shouldn’t increase going forward. Last month, the bank decided it would no longer originate single-family residential loans.
Opus said it intends to hold its existing single-family residential loans—which totaled about $327 million at the end of 2013—through maturity.
Commercial business loans represented another 9% of Opus Bank’s total loan portfolio at the end of last year.
IPO on Deck
The emphasis on multifamily lending is one of the more notable disclosures in the recent registration statement Opus filed with the Federal Deposit Insurance Corp.
Opus Bank is planning to raise nearly $200 million in an initial public offering, the first traditional IPO in nearly two years for an Orange County company that’s not a homebuilder. The IPO is expected to launch as soon as this week.
A date for the IPO becoming effective hasn’t been announced. Opus, assuming the offering goes as planned, would have a market value of about $1.1 billion.
Opus has applied to list its common stock under the ticker OPB on the Nasdaq exchange.
The planned IPO marks another chapter in the quick rise of Opus Bank, which had $3.7 billion in assets as of the end of 2013, along with $2.9 billion in loans and $2.7 billion in deposits.
The bank, headed by Chairman and Chief Executive Stephen Gordon, has grown since a $424 million recapitalization of Bay Cities National Bank in 2010, partly by acquisitions, including buys of Everett, Wash.-based Cascade Financial Corp. and Fullerton Community Bank.
Opus last year ranked No. 1 on the Business Journal’s list of the fastest-growing private companies, with a 2,000% revenue increase over a two-year period to about $157 million.
Opus Bank’s focus on multifamily lending echoes national trends; apartment loans made up about 38% of all commercial loans in 2013—the most of any property type, according to a study released last week by the Mortgage Bankers Association.
“Multifamily rental properties drew the most financing, and banks and thrifts were the largest source of commercial real estate lending” said Jamie Woodwell, the association’s vice president of commercial real estate research.
The average size of an apartment loan for Opus was $2 million at the end of 2013, with the typical loan-to-value ratio roughly 68%.
Specific deals weren’t mentioned in the bank’s registration statement. Larger loans listed on the company’s website include the $57.9 million refinance of a multiproperty portfolio in Los Angeles County, as well as a $26.4 million refinancing of a portfolio in both L.A. and Orange County.
The bank—which bills itself as one of the largest apartment lenders on the West Coast—said it is taking precautions to avoid losses from any downturn in the multifamily market or the commercial real estate market at large.
“Due to the concentration in real estate loans that is the result of our growth over the last three years, we have put into place more stringent underwriting criteria related to our commercial real estate and multifamily residential loans, as well as monitoring procedures, including quarterly market evaluations and semi-annual loan portfolio stress testing,” the bank’s registration statement said.
The registration statement noted that multifamily residential loans have the lowest loss rates of all major loan types over the past 12 years, according to FDIC data.
