This week, Pyatt Broadmark has put together a quick overview of their two funds that have been featured on RealCrowd. They provide information on how they operate, what makes them different and an overview of one of the representative transactions within the fund.


 

Broadmark Capital is pleased to announced the return of the Pyatt Broadmark Lending Fund I (PBRELF I) to the RealCrowd Platform. The goal of PBRELF I is to preserve capital while generating double-digit returns.

Broadmark Capital has been utilizing RealCrowd to raise capital for its two real estate lending funds:

PBRELF I

  • Trailing 12 month return 12.30%.
  • Investors receive monthly distributions via check or ACH.
  • 130 active loans in the portfolio.
  • Investment is immediately diversified over the entire portfolio.
  • No losses to date.

BRELF II

  • Trailing 12 month return 11.76%.
  • Investors receive monthly distributions via check or ACH.
  • 24 active loans in the portfolio.
  • Investment is immediately diversified over the entire portfolio.
  • No losses to date.

Both funds are unleveraged and act as “banks” for builders and developers. Established in August 2010, PBRELF I lends against properties in the Pacific Northwest and has $118.6M in assets under management, approximately $5M of which has been raised from RealCrowd investors. BRELF II has been in operation since April 2014, is focused on the Mountain West, and has $12.2M in assets under management, approximately $2M of which was raised from RealCrowd investors. Returns in both funds are above 11.5% annualized since inception assuming reinvestment, and neither fund has incurred any losses.

Every month we receive questions from both current and potential investors regarding the types of loans we write, the types of situations that can profitably use Fund financing, what we look for in borrowers, and a variety of other “how does it work?” questions. While we disclose every loan made and paid off on a monthly basis, in an effort to provide even greater transparency we try to profile at least one loan a month in detail in our newsletter. The following is a profile of one of the loans in PBRELF I’s portfolio:

In January 2015, PBRELF I wrote a first deed of trust $1,340,000 bridge loan on two 5,500 SF parcels (11,000 SF total) in the Eastlake neighborhood of Seattle. The commercial appraisal valued the land for both parcels at $2,260,000 ($226,000 per buildable unit), giving the Fund a 59% LTV. Although the Fund generally does not lend over 50% LTV against vacant land, because the borrower already had a master use permit (MUP), had submitted an application for the building permits, and was building highly marketable townhomes in a desirable neighborhood, we allowed a 59% LTV.

The borrower needed a bridge loan because his purchase loan was coming due but he had not yet obtained the building permits necessary for a bank construction loan. He planned to obtain the building permits, secure traditional construction financing, and repay the Fund in full in 90 days. In case the borrower was unable to secure bank financing, we underwrote the entire project and concluded that we could provide financing to complete the project, if necessary. The building permits were issued, the borrower obtained a bank loan, and the Fund was repaid in full within 90 days.

Because our funds are unleveraged and we lend capital to the market as we raise it from investors, we must carefully manage the amount of new investment capital we take in. We consider the demand for new loans, our production capacity to meet increased demand for new loans, and upcoming payoffs of existing loans when opening each fund to new investment.   Our approach to growth is disciplined and we will not sacrifice the returns our investors have come to expect for hasty expansion. Towards that end, we sometimes initiate an investor waiting list.

After a short absence, PBRELF I is once again available for investments on the RealCrowd site. We are very pleased with RealCrowd and the opportunity it provides to meet new investors. Through a careful approach to growth and the support of both old friends and new, we expect our funds to continue to provide investors with both attractive returns and capital preservation for the foreseeable future.

Adam Fountain
Managing Director
Pyatt Broadmark Management

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