From Crisis To Confidence: How A Bridge Lender And Its Clients Navigated The Pandemic

Things were looking good for Tamir Shadian’s newest commercial real estate investment. After shopping around for financing, he had found a lender that shared his enthusiasm for the 4,500 SF commercial property in Brooklyn and closed on a bridge loan in early 2020 with the expectation that he could pay it off by the end of the summer.

Shadian, an experienced investor in Brooklyn mixed-use properties, said the building had underperformed under a previous owner, but he was able to rent out all seven storefronts to local businesses serving the community’s needs, including two restaurants, a barber shop and a medical practice. 

“I leased the storefronts to tenants at a very good rent and I was able to refinance the property,” Shadian said.

And then, something happened that no revenue projection could have predicted: New York City became the early U.S. epicenter of the emerging coronavirus pandemic, and many businesses — including several of Shadian’s tenants — were forced to close their doors.

“I couldn't collect any rent during the early months of Covid,” Shadian said. “I had reserves for a couple of months, but then my reserves dried out. That meant I couldn't cover the entire mortgage payments.”

Facing a dire situation, he turned to his lender, Emerald Creek Capital, hoping for some sort of relief.

“I worked with Tamir and we came up with a payment plan that made sense for both him and us,” said Mark Bahiri, managing partner and co-founder of Emerald Creek Capital. “Ultimately, because of our flexibility, he was able to weather the storm and stay in good standing.”

Bahiri said the personal attention Emerald Creek showed Shadian isn't unusual for the Manhattan-based commercial bridge lender. Working with middle-market clients where the average loan is between $10M and $20M, he said, requires a nontraditional lender to have a granular understanding of a client’s business and empathy for its unique challenges.

In the case of the Brooklyn commercial strip, Bahiri said his firm was confident the borrower would again be successful once Covid-19 restrictions were lifted. Emerald Creek’s hunch proved correct, but it wasn't always easy to be sanguine in the early days of the pandemic.

In 2020, Bahiri told Bisnow that many of Emerald Creek’s borrowers were in “crisis mode” and needed “to move quickly to refinance, recapitalize or salvage deals.” After two years of working closely with clients like Shadian, Bahiri said the situation today is much different for most of them.

“They are faring a lot better than they were two years ago when the pandemic first hit,” he said. “I think there's more confidence out there in the marketplace.”

Emerald Creek originated 75 new loans during the crisis, most of them with repeat clients, Bahiri said. Thanks to the firm's hands-on portfolio servicing, it collected 99% of contracted interest income during the pandemic.

Bahiri attributes much of that success to strategic changes Emerald Creek implemented prior to the pandemic.

“We had made a conscious decision even before the pandemic hit to massively reduce our exposure to big-box retail, office and hospitality, which were the three main asset classes that got hit hardest,” he said.

Bahiri explained the firm had been concerned about the “Amazon effect” that was cutting into sales at brick-and-mortar stores even before people were homebound during Covid-19. In response, it decided to focus on multifamily and mixed-use properties. Its portfolio also includes self-storage and light industrial properties, two other sectors that have done well during the pandemic.

Property owners seeking a bridge loan in today’s environment need to perform their due diligence, Bahiri said. Questions he said they should ask include: Is the lender well capitalized? Does it have a good reputation in the CRE community?

“What is important for borrowers who are considering alternative, nonbank financing to know is that if there is a major market event, are the people behind the lending firm going to be accommodating and help them work through their challenge?” he said.

Bahiri said that in all cases where Emerald Creek worked with a borrower to provide some much-need slack during the depths of the pandemic, the client was able to return to compliance with the terms of its loan and resume making full monthly payments.

As for Shadian, he said he learned some lessons during the pandemic as a modestly sized commercial property owner that ought to serve him well moving forward.

“We never know if any disasters or delays might occur in the market, so you need to study the numbers very well to make sure that you'll be able to pay the bridge lender,” he said. “And always work with a lender that you're comfortable with and trust.”

This article was produced in collaboration between Studio B and Emerald Creek Capital. Bisnow news staff was not involved in the production of this content.

Studio B is Bisnow’s in-house content and design studio. To learn more about how Studio B can help your team, reach out to studio@bisnow.com.