• Thu. Dec 1st, 2022

New York commercial real estate lending startup Lev raises $170 million

ByWillie M. Evans

May 5, 2022

The residential mortgage industry has many startups and large companies that have moved the process online, whether as direct lenders or brokers. Yaakov Zar, CEO and co-founder of Lev, said commercial real estate was lagging behind.

Of course, there are reasons for this. Commercial real estate loans are more complex and less frequent for most lenders, so there’s less demand for automation in the process, Zar said.

“Commercial real estate has always been lower on the list,” he said, “but I think the time is right and technology is definitely here to create better experiences.”

Zar previously founded Dispatch, a startup that provides software for the home service industry. He became interested in the loan process after a frustrating process of several months to obtain a home loan. He became a licensed home loan originator, but eventually decided the biggest opportunity was in commercial real estate.

Lev closed $1 billion in commercial real estate loans last year, representing 10x year-over-year growth, according to company figures. The company has 100 employees.

Banks and other lenders granted a record $690 billion in commercial real estate loans in 2021, up 8.7% from 2020 and 2.1% from 2019, according to data from the research firm. Trepp research, as reported by The The Wall Street Journal.

But that total was helped by the Federal Reserve, which kept interest rates near zero. The Fed raised its benchmark short-term interest rate by half a percentage point on Wednesday — the biggest increase since 2000 — and signaled more hikes were on the way. The changing environment has already taken its toll on online residential mortgage markets. Better.com had high profile layoffs at the end of 2021, and Rocket Mortgage job cuts announced last month.

Interest rate jumps tend to cool the residential mortgage market faster than the commercial market, according to Zar. Commercial real estate loans are typically structured for five to 10 years, compared to 30-year mortgages, he said, so homeowners are better able to weather the storm and refinance when rates are higher. favorable.

Still, he added, “we are growing fast enough that even a 5-10% national drop in volume will have a very small impact on our growth.”

Investors were apparently willing to make the same bet, although Lev refused to disclose the valuation of the new transaction. Lev raised a $30 million Series A round at a $130 million valuation in July.

JLL Spark, the real estate services company’s venture fund, backed this most recent investment and Lev’s Series A round.

Raj Singh, managing partner of JLL Spark, said the company sees Lev as an important tool to bring greater efficiency and more liquidity to the commercial lending market.

Interest rates will no doubt weigh on all loans, Singh said, but the company is confident in Lev’s ability to adapt to his environment.

“The reality is that this is a huge, huge market, and this business is at an early stage with still room to grow,” he said.