Fund Narrows Gap for Short-Term Financing
Many smaller regional banks, which previously provided short-term debt, were forced to close or were absorbed following the 2008 financial crisis, and Broadmark is satisfying an unmet need for short-term financing.
PORTLAND, OR—Broadmark Real Estate Management II LLC, a private lender serving small to mid-sized builders and developers in the Mountain West, has relaunched its open-ended fund, Broadmark Real Estate Lending Fund II on RealCrowd. The fund, which currently has $359 million in AUM, underwrites short-term first position loans to finance real estate transactions in Colorado, Utah and Texas.
Investors are immediately diversified across the entire portfolio of 125 conservatively underwritten loans. BRELF II has generated annualized returns in excess of 11% since its inception.
“There is a significant gap in the market for short-term real estate financing,” says Adam Fountain, co-owner of BREM. “Short-term loans are typically used to develop, renovate or improve a commercial or residential property. We are satisfying an unmet need for short-term financing while offering an investment product poised to deliver strong risk-adjusted returns to our investors for the long-term.”
Fountain notes that many smaller regional banks, which in the past provided short-term debt, were forced to close or were absorbed by larger banks following the 2008 financial crisis.
“Small regional banks that survived the Great Recession rarely provide short-term financing in the current market as a result of more restrictive regulations,” says Fountain. “This creates a gap in the credit market, and an opportunity for us and our investors.”
Broadmark Real Estate Lending Fund II is targeting a fundraise of approximately $10 million through the RealCrowd crowdfunding platform.
“We have had tremendous success utilizing RealCrowd as part of our global fundraising strategy,” says Fountain. “By partnering with RealCrowd, we are giving investors the opportunity to invest directly into our fund, while also providing the convenience of doing so via a user-friendly online platform. To date, our firm has raised more than $30 million in capital through the RealCrowd platform.”
RealCrowd is an online marketplace that connects sponsors directly with accredited investors.
“Our platform is unique among crowdfunding providers based on the ability for investors to establish a direct relationship with the real estate sponsor,” says Adam Hooper, cofounder and CEO of RealCrowd. “Many of today’s crowdfunding sites function like a hedge fund, which can drive up fees on both sides. To keep costs low and give everyday accredited investors access to institutional-quality investments, RealCrowd serves as a direct marketplace where these entities build new relationships.”
RealCrowd also has a high bar for approval to be featured on its marketplace. The firm ensures that each real estate sponsor on its platform has more than 10 years of principal-level experience and more than $50 million in transactional history, while also ensuring that each investor is accredited. It recently announced the launch of a full due diligence report for every sponsor that is featured on the marketplace, increasing the transparency and availability of information for prospective investors.
“Our platform is all about connecting everyday accredited investors with best-in-class sponsors like Broadmark Real Estate Management while also meeting the sponsor’s needs to reach a new investor audience,” Hooper tells GlobeSt.com. “The short-term real estate financing strategy of the BREF ll Fund has been very attractive to investors across our platform, shattering records in the process.”
Real estate crowdfunding is picking up steam due to more investors looking to diversify into specific regions and types of property, and the waning desire to own physical real estate due to ongoing maintenance costs. By 2025, the crowdfunding industry as a whole is anticipated to be valued at more than $300 billion and online real estate marketplaces are primed to capitalize on that explosive growth, according to FinancialSamurai.com.
The biggest trend is the rise of institutional capital. Accredited investors have so far been the target audience, accounting for roughly 8.5% of all households and 70% of all private wealth, says Financial Samurai. They are considered part of the valuable affluent class that every financial institution wants to attract.