The COVID-19 pandemic has sparked a major government intervention to stabilize the financial markets. The scale of the federal stimulus through the Coronavirus Aid, Relief, and Economic Security (CARES) Act, to the tune of $2T, is unprecedented and will likely be followed by another (bigger) stimulus package which is in the works. Federal Reserve (Fed) Chairman Jerome Powell has repeatedly stated, “There’s a lot more we can do to support the economy, and we’re committed to doing everything we can as long as we need to.” This strong message from the government has provided a significant boost to market sentiments.
The real estate market has been hit hard as businesses have been shut down with no visibility into the duration of the lockdown. The stimulus has helped certain subsets of the commercial real estate sector avoid a complete collapse while other subsets face a challenging future unless addressed by the next stimulus package. For instance, as businesses remain shut, we have seen unemployment soar to record levels, which in turn, should have led to significant defaults in home rental/mortgage payments. However, with the Fed’s intervention through direct payments to individuals and loans to small businesses to support payroll, recent data suggests the impact on the multifamily and housing sector has been largely mitigated. The market is supported by the large liquidity injection from the Fed and will require continued support until the market stabilizes, not when the shutdown ends, but rather when economic activity resumes and the effects of the downturn have subsided.
On the securities side, the Fed began to purchase private AAA-rated Commercial Mortgage-Backed Securities (CMBS) debt issued before the coronavirus shock. However, there are no plans to purchase new privately issued CMBS debt. This means that the big banks, which typically offer such private CMBS debt, can be expected to greatly contract their issuance and/or cut back on the leverage ratios, fearing that there will be no buyers. Thus, the real estate sector faces the prospect of a slowdown in the private CMBS market which is worth $500 billion, with large amounts of that debt going delinquent as businesses shut down across the economy.
Commercial real estate debt as a whole amounts to a massive $3.6T. Much of this debt is tied up in even more illiquid and opaque loans than the CMBS, which are publicly traded. With no Fed support, we have seen the markets come to a near standstill and become significantly expensive for borrowers. Currently, the Fed continues to buy only Residential Mortgage-Backed Securities (RMBS) from Fannie Mae and Freddie Mac, or RMBS guaranteed by Ginnie Mae. No purchases of privately issued RMBS, totaling over $1.7T (Source: SIFMA – Fixed Income Outstanding), seem to be forthcoming from the Fed even as it has announced its decision to purchase corporate junk bonds. We expect lenders with significant liquidity to come out stronger from the downturn, and we are already witnessing significant spread widening. The ferocity of the downturn in the real estate sector will become clear once attempts are made to resume business as usual after the lockdown and once the Fed eases off the stimulus.
Sign up for a Yieldstreet account or follow us on social to keep up with the latest news, product updates, and content. If you are in need of liquidity, please contact our originations team at [email protected] or submit an application here: Raise Capital.
1 Past performance is no guarantee of future results. Any historical returns, expected returns, or probability projections may not reflect actual future performance. All securities involve risk and may result in significant losses.
2 Represents a net estimated, unrealized annualized internal rate of return (IRR) of your portfolio and is based by reference to the effective distribution dates and amounts to and from the investments, as well as any outstanding principal and accrued and unpaid interest as of the current date, after deduction of management fees and all other expenses charged to the investments.[read more]
3 "Annual interest" represents an annual target rate of interest and "term" represents the estimated term of the investment. Such target returns and estimated term are projections of the returns or term and may ultimately not be achieved. Actual returns and term may be materially different from such projections. These targeted returns and estimated term are based on the underlying agreement between the SPV and borrower or originator, as applicable.
4 Reflects the initial quarterly distribution declared by the board of directors on February 6, 2020, which will be payable to stockholders of record as of June 10, 2020, and the initial offering price of $10 per share.
5 The Fund will cease investing and seek to liquidate the Fund's remaining portfolio no later than 48 months after the Fund's initial closing. It may take up to twelve months thereafter to fully monetize any remaining illiquid investments in the Fund's portfolio.
6 Represents the sum of the interest accrued in the statement period plus the interest paid in the statement period.
No communication by YieldStreet Inc. or any of its affiliates (collectively, “Yieldstreet™”), through this website or any other medium, should be construed or is intended to be a recommendation to purchase, sell or hold any security or otherwise to be investment, tax, financial, accounting, legal, regulatory or compliance advice. Nothing on this website is intended as an offer to extend credit, an offer to purchase or sell securities or a solicitation of any securities transaction.
Any financial projections or returns shown on the website are estimated predictions of performance only, are hypothetical, are not based on actual investment results and are not guarantees of future results. Estimated projections do not represent or guarantee the actual results of any transaction, and no representation is made that any transaction will, or is likely to, achieve results or profits similar to those shown. In addition, other financial metrics and calculations shown on the website (including amounts of principal and interest repaid) have not been independently verified or audited and may differ from the actual financial metrics and calculations for any investment, which are contained in the investors’ portfolios. Any investment information contained herein has been secured from sources that Yieldstreet believes are reliable, but we make no representations or warranties as to the accuracy of such information and accept no liability therefor.
Private placement investments are NOT bank deposits (and thus NOT insured by the FDIC or by any other federal governmental agency), are NOT guaranteed by Yieldstreet or any other party, and MAY lose value. Neither the Securities and Exchange Commission nor any federal or state securities commission or regulatory authority has recommended or approved any investment or the accuracy or completeness of any of the information or materials provided by or through the website. Investors must be able to afford the loss of their entire investment.
Investments in private placements are speculative and involve a high degree of risk and those investors who cannot afford to lose their entire investment should not invest. Additionally, investors may receive illiquid and/or restricted securities that may be subject to holding period requirements and/or liquidity concerns. Investments in private placements are highly illiquid and those investors who cannot hold an investment for the long term (at least 5-7 years) should not invest.
Alternative investments should only be part of your overall investment portfolio. Further, the alternative investment portion of your portfolio should include a balanced portfolio of different alternative investments.
Articles or information from third-party media outside of this domain may discuss Yieldstreet or relate to information contained herein, but Yieldstreet does not approve and is not responsible for such content. Hyperlinks to third-party sites, or reproduction of third-party articles, do not constitute an approval or endorsement by Yieldstreet of the linked or reproduced content.
Investing in securities (the "Securities") listed on Yieldstreet™ pose risks, including but not limited to credit risk, interest rate risk, and the risk of losing some or all of the money you invest. Before investing you should: (1) conduct your own investigation and analysis; (2) carefully consider the investment and all related charges, expenses, uncertainties and risks, including all uncertainties and risks described in offering materials; and (3) consult with your own investment, tax, financial and legal advisors. Such Securities are only suitable for accredited investors who understand and willing and able to accept the high risks associated with private investments.
Investing in private placements requires long-term commitments, the ability to afford to lose the entire investment, and low liquidity needs. This website provides preliminary and general information about the Securities and is intended for initial reference purposes only. It does not summarize or compile all the applicable information. This website does not constitute an offer to sell or buy any securities. No offer or sale of any Securities will occur without the delivery of confidential offering materials and related documents. This information contained herein is qualified by and subject to more detailed information in the applicable offering materials. Yieldstreet™ is not registered as a broker-dealer. Yieldstreet™ does not make any representation or warranty to any prospective investor regarding the legality of an investment in any Yieldstreet Securities.
Banking services are provided by Evolve Bank & Trust, Member FDIC.
Investment advisory services are provided by YieldStreet Management, LLC, an investment advisor registered with the Securities and Exchange Commission.