A parking structure at the Irvine Towers office complex near John Wayne Airport offers a quick indicator of how much ground mortgage lenders in Orange County made up during the post-recession resurgence of recent years.
A section is set aside for Greenlight Financial Services, a direct-to-consumer mortgage lender best known for its “you’ve got the Greenlight” radio jingle.
Indeed, the company grew so fast over the past two years that it quickly ran out of parking spaces for employees at its 90,000-square-foot headquarters at Irvine Towers.
Greenlight uses a team of valets to accommodate excess cars in its assigned parking area. It also shuttles employees from a nearby office complex where it leases another 25,000 or so square feet and has some extra parking spaces.
Parking isn’t as tight as it was a few months ago, following the recent hike in interest rates. Still, few observers would have seen such logistical challenges in the future at the Irvine Towers campus when the mortgage industry imploded to set off the Great Recession. The largest tenant at the office campus back then was subprime lender New Century Financial Corp., which proved to be a harbinger of the broader mortgage meltdown when it went out of business in 2007. Recession gripped the whole economy the following year, plunging to a low-point in 2009.
A stubbornly slow recovery eventually took hold, though, and combined with a foreclosure-driven supply of bargain homes and a long run of historically low interest rates to bring mortgage lending back from the brink in a big way.
Greenlight, which was bought by Texas-based Nationstar Mortgage Holdings Inc. in July for $75 million, isn’t the only local example of the trend.
Three Companies
The housing market’s recent hot streak ran through the second quarter, in line with this week’s Business Journal’s list of fastest-growing private companies (see related story, page 1; Special Report, page 39; list, starting on page 50). Three of the top 30 on the list have significant lending operations, including No. 1 Opus Bank in Irvine, No. 24 Stearns Lending Inc. in Santa Ana, and No. 29 New American Funding in Tustin (see story, page 40).
A number of other companies on the list have substantial lending operations here, with their combined revenue for the last year estimated at nearly $1.6 billion. That represents nearly 8% of the total earnings for all 165 companies on the list.
The resurgence of mortgage lenders also is reflected in OC’s recovering office market, which now counts a vacancy rate near 16%, its lowest rate since 2009.
Mortgage-lending-related jobs now total about 38,000 in OC, or 2.9% of office jobs here. That’s a 20% increase from 2009, according to a new report from the Irvine office of brokerage Jones Lang LaSalle.
Mortgage-related jobs in OC peaked in 2005, when 5.5% of the area’s office jobs were lending-related, according to the report. The largest lender at the time was Orange-based subprime lender Ameriquest Mortgage Co., which along with its affiliates was estimated to have leased nearly 2 million square feet of space across the county.
Anaheim-based CashCall Inc. (No. 158 on this week’s list) is now believed to be the area’s largest lending-related tenant. The company, founded by J. Paul Reddam, now occupies nearly 400,000 square of space in three different office complexes.
The company—which operates a mortgage business and a consumer finance division—has nearly doubled the amount of space it occupies over the past three years.
The Jones Lang LaSalle report said employment at area mortgage lending companies “has surged in response to low interest rates and refinancing activity.”
An entrepreneurial spirit also played a part, according to those executives who survived the downturn.
Glenn Stearns told the Business Journal last month that he bet “every last dime I had” on his company at the nadir of the financial crisis, when other competitors went bust.
Stearns Lending operated with a bare-bones staff for a few years before regaining its feet. The company now employs about 800 people in the area, up nearly threefold from two years ago. It had a reported $591.5 million in revenue last year and recently inked leases to expand at the Xerox Center office tower in Santa Ana and the Metroplex campus in Costa Mesa.
Greenlight and CashCall “were both started by entrepreneurial people,” said Jay Carnahan, president of Irvine-based brokerage Orion Property Partners Inc., who represents both companies. “They figured out how to survive the (last financial) crisis.”
“They understood that (lending) is a cyclical business,” Carnahan said. “There’s always another cycle.”
The cycle looks set to level off or trend downward, according to Jones Lang LaSalle Senior Managing Director Jeff Ingham.
Dip Projected
Jones Lang LaSalle projects a slight dip in lender-related employment in OC over the next few years, as interest rates rise and refinancing activity dries up.
“I expect to see a decline,” said Ingham, who pointed to recent announcements from larger banks such as JPMorgan Chase & Co. and Wells Fargo Bank regarding plans to cut back on mortgage operations, including OC offices.
Those cuts “will directly relate to what’s going on here,” Ingham said.
The good news is that the area’s office sector, and overall economy, is much less exposed to the mortgage industry than it was at the last peak, as the healthcare, medical and insurance sectors in particular have expanded, according to Jones Lang LaSalle.
Any potential cutbacks in the mortgage lending industry should be less severe on the office sector than the previous cycle, the brokerage predicts.
