Investment payoff: Yieldstreet’s Park City Luxury Property Refinancing
Key takeaways
- Yieldstreet partnered with Avatar Financial to finance a $13.1M loan.
- The term was 12 months with a targeted return for investors of 8.65%.
- The loan was paid in full, in line with its maturity.
Yieldstreet helped refinance an existing investment on the platform, and that refinancing paid off in full with gains hitting our targeted return for investors.
Here’s what happened
In March 2021, we partnered with Avatar Financial (Avatar) to lend $13.1M to refinance an existing Yieldstreet investment. Yieldstreet’s position in the new loan, a first mortgage, totaled $9.85M. The term was 12 months and the targeted investor yield was 8.65%.
The refinancing was secured by an ultra-luxury house that was under construction and two single-family homes that had already been completed – all located in Park City, Utah. Construction on the ultra-luxury house was expected to finish in October 2021 and the plan was to sell the house and use the proceeds to repay investors.
That property was 65% complete at the time of the loan and we marketed the investment based on an “as complete” loan to value ratio (LTV) of 35.6%. In other words, we believed the value of the finished ultra-luxury home was far greater than the amount investors were lending. So, Yieldstreet’s investment was equivalent to 35.6% of the luxury home’s value once it was completed. Also, the LTV excluded the value of the two single-family homes that helped secure the loan.
The borrower remained current on their monthly interest payments, and in July 2021, sold the two single-family houses, de-risking a portion of the investment. Yieldstreet investors were repaid their pro-rata share of approximately $3M in principal, roughly 30% of the initial investment.
Construction of the ultra-luxury home was completed last fall and a Certificate of Occupancy was issued in December 2021. The property was sold just before its March 2022 maturity. Investors were paid in full and achieved the targeted yield.
The $10K question
Another way to look at this deal is to consider what would have happened had you invested the minimum of $10,000 when the deal launched in March 2021. The investment was paid off a year later in line with the expected maturity. The borrower returned all the principal, in this case, your $10,000 with a return that yielded approximately $700.
You may be wondering why $700 and not $865? Investors were being paid for the risk they took by lending the money. Since 30% of the original capital was paid back early, some of the risk was removed and that de-risking left a smaller pool of capital on which the 8.65% targeted yield was achieved.
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Yieldstreet provides access to alternative investments previously reserved only for institutions and the ultra-wealthy. Our mission is to help millions of people generate $3 billion of income outside the traditional public markets by 2025. We are committed to making financial products more inclusive by creating a modern investment portfolio.
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]