Online Capital Marketplace Finds New Ways to Meet Sponsor & Investor Demand
SAN FRANCISCO – RealtyShares, the online marketplace that is transforming the real estate investment landscape by connecting accredited and institutional investors to real estate investment opportunities nationwide, today announced that it is introducing new mezzanine financing products designed to meet demand from both investors and sponsoring real estate companies.
These products typically involve investors being in a “preferred” position to the equity held by the project sponsor, although the investments remain subordinate to the 1st-position debt on the property. The offerings usually involve investment terms of just two to three years.
“These products give investors the opportunity to potentially enjoy higher yields on their investments, even though the project generally still has a true “equity cushion” that helps reduce the effect of asset value diminution risk,” said Nav Athwal, Founder and CEO of RealtyShares. “By their nature, of course, these mezzanine products are somewhat riskier than first-lien debt; on the other hand, investors are in a “preferred position” relative to sponsor equity in the project, and the products usually feature relatively brief investment periods. Thus far, both investors and sponsors have responded enthusiastically to this new financing development. We at RealtyShares are pleased to have been an innovator and to have helped lead the way in developing products that satisfy market demand for real estate investment capital.”
“This type of product was not unseen previously, but it was typically offered only by larger institutional investors,” said Javier Benson, RealtyShares’ Director of Investments. “We believe that there is an opportunity for online capital marketplaces like RealtyShares to further develop this market, particularly for smaller projects where institutions haven’t always been participants. Since annual return rates in this portion of the real estate ‘capital stack’ can often outpace those of the S&P 500 Index, we thought there would be some investor interest — and there certainly has been. We’ve now implemented these financing products across various property types — single-family residences as well as multi-family apartment buildings — and the projected returns are generally in the 14-20% range.”
“These products fill a market niche that has been left void since banks retrenched in the wake of the Great Recession,” continued Mr. Athwal. “The attractiveness of these products — whether debt or equity — is that both investors and sponsors benefit, in different ways, from reasserting themselves in this level of the traditional capital stack. Investors get potentially higher returns and a preferred position, while sponsors retain the remaining ‘upside’ potential, which they often prefer to do when they’re confident of the property’s prospects. This financing approach is thus often seen as a ‘win/win’ proposition for both sponsors and investors. We’re proud to have developed a game changing product for small-balance commercial and residential real estate projects. RealtyShares intends to continue to seek out improved real estate financing solutions as we continue to increase our market presence.”
RealtyShares is transforming the real estate investment landscape by connecting borrowers and sponsors to debt and equity capital from accredited and institutional investors, across an array of financing products. Through the RealtyShares website, these investors can browse investment opportunities, perform due diligence, invest online and have 24/7 access to an investor dashboard to watch how their investments are performing.
RealtyShares offers equity securities through WealthForge,LLC, member FINRA/SIPC. For more information on how to become a real estate investor or to seek capital through the RealtyShares marketplace, please visit http://www.realtyshares.com.