Sabal Financial Group CEO on Charlotte choice for lending hub

Pat Jackson was raised in York County and went to Winthrop University, but it’s been about 30 years since he’s called the Charlotte area home.

Today, he lives on the West Coast, where he's CEO of Sabal Financial Group, based in Newport Beach, Calif.

A farm he owns in his hometown of Clover has given him a reason to visit the Charlotte area. But now he has another excuse.

Around late August, Sabal opened a homebuilder-finance office in Charlotte, in the SouthPark Towers office building at 6000 Fairview Road.

Jackson said Charlotte will be the mid-Atlantic hub for the lending operation, which is in addition to similar offices already open in Arizona, Florida and elsewhere.

Initially, the Charlotte operation will employ about three people, Jackson said, but that could grow as more loans are made.

Sabal, whose other services include providing bank holding companies with analysis of lenders that they might acquire, started the homebuilder operation last year. The company hired a former Bank of America executive, Tom Farrell, to head it.

Jackson said Sabal is seeking to lend to smaller, private builders that typically have been struggling to get financing from banks in the wake of the housing downturn.

While that potentially means more access to lending for homebuilders in the Charlotte area, it also means paying the higher interest rate that Sabal charges in exchange for taking on risk that others won’t.

The Observer recently interviewed Jackson on the hub. His comments have been edited for brevity and clarity.

Why pick Charlotte for the hub?

We think Charlotte offers us, even over Atlanta, some real advantages. One, it’s got a great airport. It’s centrally located. I’m particularly, personally, very, very partial to Charlotte. Charlotte offers for us a real opportunity to continue to diversify our business.

We’re in the financial services business, primarily around real estate, and given the deep bench of banking that Charlotte has historically had, as we continue to grow there’ll be a fertile ground for bringing in great talent who are maybe not interested in working for a big bank.

Any other plans for Charlotte?

As we continue to grow, running everything out of California will not allow us to take advantage of all the different businesses that we have. We will need to pick kind of our East Coast spot. Charlotte is a very strong candidate for doing that.

We’ll use our builder-lending business to establish this hub. And as we see how that goes and other lending businesses continue to grow kind of on the same trajectory that the builder-lending business has grown, we’ll likely cohabit in one of those locations. I would say that right now Charlotte’s probably the No. 1 candidate for that.

You, obviously, see a lending void to fill. Tell me how hard it is for some homebuilders to get bank loans.

You’ve got banks absolutely lending to homebuilders. But if you look at the space that we serve, which is primarily the smaller and midsize builders, they’ve had a tough five years, and often their balance sheets are pretty roughed up. The vast majority of the smaller builders can’t fit the bill. There is always going to be a market for people who want new homes.

We think that there’s an interesting dynamic at work there, where builders are starting to fill the void, and because of the lack of financing they’ve had a real problem. And we believe that we have a unique product to help them fill that void.

But you’re also charging them higher interest rates.

Yeah, we do. But it’s not as high as you might think. You hear the term "hard money." We’re not anywhere remotely close, which is typically double-digit interest rates. We’re kind of in the 7 percentage rate … depending on the perceived risk that we see in that project. It’s for a risky project, which is land and homebuilding. That’s still perceived as being a pretty high-risk financing.

How big are the projects you finance?

We’re doing projects that are typically 100 lots and less, which kind of falls in the $50 million total commitment and below. If you just kind of think about it, the public homebuilders typically are looking for larger projects than that, and that by its very nature starts to match up what our target project size is. It naturally starts to gravitate to the smaller, more regional homebuilder. And because they’re not public, some of the resources that they would have to them for financing are lessened.

It ends up being, typically, the non-publics that we’re dealing with. Typically, it’s going to be a nichey builder. You don’t see the publics building out 15 lots in Myers Park. That’s absolutely what we do.

The homebuilding industry complains about a lack of developed lots. Why don't you fund that?

We’re not really looking at that right now. Because we’re just a lender, we’re really not interested in taking development risk. We are only really focused on entitled land.

What was it like growing up on a farm?

As a young boy, I would walk out in the fields at night, and I could see the glow of Charlotte way off in the distance. That was our Oz.

Unfortunately, Charlotte has grown into my farmland to the point where it’s not the same feel as it was.