Investment Payoff: Washington D.C. hospitality property

April 29, 2022 • 2 min read

Key takeaways

Yieldstreet provided a $4.2 million mezzanine loan to a Washington, D.C. – based developer to convert a 99-room hotel into short-term rental studios.
Investors were offered a 10% target yield¹ with an initial investment term of 36 months, and an option for one twelve-month extension.
Amidst the swift, successful completion of the renovation work required to finalize the conversion project, the investment was fully repaid two years after launch.

Yieldstreet’s investment in a Washington, DC, based real estate developer was fully repaid in March 2022, two years after the initial loan – and a year in advance of the initially expected maturity date. Investors earned a 10.5% IRR, in excess of the originally targeted 10% IRR.

Investment thesis

Yieldstreet closed a $4.2M mezzanine loan, secured by the borrower’s equity interests in a 99-key limited-service hotel located in a commercial zone in Downtown Washington DC. The goal was to support the developer’s conversion of the property into 99 furnished studio apartments, which would then be turned over – for a 15-year lease – to a leading short-term rental operator. While Washington, DC regulation restricts short-term rentals in residential zones, no such limitations exist for commercial districts.

Investment outcome

The loan had an initial three-year term, with an additional twelve-month extension option. Yieldstreet’s investors payments were scheduled to accrue on their accounts and be paid-in-kind until conversion and lease payments had started.

Following the investment’s launch, the developer was able to keep the conversion project on track by successfully executing on each phase of its business plan, which led to an earlier exit, with returns outperforming the original IRR².

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1. Target returns are offered as opinion and are not referenced to past performance. Target returns are not guaranteed and results may differ materially.
2 Past performance is not indicative of future results

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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 an average net realized internal rate of return (IRR) with respect to all matured investments in your portfolio, utilizing the effective dates and amounts to and from the investments and net of management fees and all other expenses charged to the investments. Past performance is not a reliable indicator of future results and should not be relied upon as the basis for making an investment decision. All securities involve risk and may result in significant losses, including the loss of principal invested.[read more]

³ "Annual interest," "Annualized Return" or "Target Returns" represents a projected annual target rate of interest or annualized target return, and not returns or interest actually obtained by fund investors. “Term" represents the estimated term of the investment; the term of the fund is generally at the discretion of the fund’s manager, and may exceed the estimated term by a significant amount of time. Unless otherwise specified on the fund's offering page, target interest or returns are based on an analysis performed by Yieldstreet of the potential inflows and outflows related to the transactions in which the strategy or fund has engaged and/or is anticipated to engage in over the estimated term of the fund. There is no guarantee that targeted interest or returns will be realized or achieved or that an investment will be successful. Actual performance may deviate from these expectations materially, including due to market or economic factors, portfolio management decisions, modelling error, or other reasons.

⁴ Reflects the annualized distribution rate that is calculated by taking the most recent quarterly distribution approved by the Fund's Board of Directors and dividing it by prior quarter-end NAV and annualizing it. The Fund’s distribution may exceed its earnings. Therefore, a portion of the Fund’s distribution may be a return of the money you originally invested and represent a return of capital to you for tax purposes.

⁵ Represents the sum of the interest accrued in the statement period plus the interest paid in the statement period.

⁶ The internal rate of return ("IRR") represents an average net realized IRR with respect to all matured investments, excluding our Short Term Notes program, weighted by the investment size of each individual investment, made by private investment vehicles managed by YieldStreet Management, LLC from July 1, 2015 through and including July 18th, 2022, after deduction of management fees and all other expenses charged to investments.

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