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Goldman Sachs acquires real estate development lender Genesis Capital

Acquisition allows Genesis to provide offerings on a national basis

Goldman Sachs announced Thursday it acquired Genesis Capital, a specialty commercial lending platform for professional residential real estate developers, reflecting the growing demand for financing for home flippers.

The acquisition from a major financial player reinforces the extreme need for more housing inventory across the country.

When Genesis Capital was founded in 2007, it started as a local lender, like most companies in the space, and operated mostly in the Los Angeles area.

In 2013, the company was able to take its operations to the next level thanks to a four-year agreement with Oaktree Capital Management. The partnership transformed Genesis from a local lender into one with a footprint in the 20 largest cities across the country.

Brian Laibow, managing director of Oaktree, explained that over the past four years, Oaktree helped oversee Genesis’ rapid development, including loan originations surpassing $2.5 billion.

“The management team has built a truly differentiated platform that should afford them continued success. We wish Genesis well under their new stewardship,” said Laibow.

This deal with Goldman Sachs will support Genesis in its next phase of growth, with a focus on achieving additional scale in its current market segments and introducing new products and financing solutions to a broader and national customer base, the company said. 

Under the agreement, Genesis is being acquired from funds managed by Oaktree Capital Management and management. Terms of the transaction were not disclosed.

While Genesis significantly grew over the last four years and especially since its founding, the company believes there is still more room for growth.

Inventory shortages have long-plagued the housing market, preventing first-time homebuyers from getting in and current homebuyers from moving out of their starter homes. That means both that there's less available housing and that the housing that is available may be in need of updating.

Rayman Mathoda, co-CEO of Genesis, told HousingWire Thursday in an interview that the median age of an owner-occupied house in America is almost 40 years old, and 63% of all the owner-occupied homes are more than 30 years old.

Those houses need to be refreshed and expanded, Mathoda said.

“We see huge opportunity going forward. We think our business is a key part of fixing the supply shortage,” Mathoda said. “We are 6 to 7 years into a housing recovery that’s characterized by a lack of housing supply virtually across the board.” 

Mathoda touched on two key things: It’s important to understand that the real estate development industry exists in all parts of the real estate cycle and that the housing recovery changes a lot from region to region.

For the first part, Mathoda stated that home flipping is only one part of the cycle. According to Mathoda, the company's clients have strong businesses in all parts of the real estate cycle, whether it’s rehabbing a foreclosed home, changing the footprint of a home or building a new home.

And for the second part, Mathoda stated that as the nation recovers from the crash, the real estate cycle will revert back to the regional housing cycles that were common from the 1930s to 2008, which means each region will have its own housing needs. As this happens, Genesis will be there to help each region’s individual needs, Mathoda said.

Mathoda explained that a big reason for why companies never scaled to be nationwide is because of the deep expertise needed in each individual region.

“You need to have deep expertise in some key areas to do it safely,” Mathoda said. This includes the importance of evaluating the house and the budget and the developer correctly and quickly.

Mathoda said this is where Genesis saw opportunity to grow. And ultimately, the company’s strategy is to be the debt-financing partner of choice to the nation’s top professional residential developers.

And now it will do so with the backing of Goldman Sachs.

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