by Yieldstreet | Staff
Yieldstreet is dedicated to finding attractive real estate investment opportunities for our investor base that provide an attractive risk-adjusted return, all while hyper-focused on principal protection in a downside scenario. Over the past two years, we’ve continued to refine our origination process in an effort to make it as efficient and transparent as possible for our clients, other CRE lenders. Through these efforts, we’ve identified some key takeaways that are often asked of us. We hope that this information is of value as you consider how best to work with Yieldstreet.
Yieldstreet offers first mortgage, mezzanine and preferred equity capital with terms up to 5 years.
We invest across the capital structure. As there are different capital requirements for different transactions, we have the ability to invest in any part of the capital stack that we believe is attractive and provides the right level of return for the risk. While the vast majority of loans made to date have been in the form of traditional first mortgage liens, we’ve also made both mezzanine and preferred equity investments.
Diversified Property Types: We lend against all property types including industrial, office, multifamily, retail, entitled land, and hospitality—primarily in the top 35 Metropolitan Statistical Areas (MSAs).
A lot of lenders are constrained by asset type or geographies. That is not the case at Yieldstreet. We’ve worked across almost every real estate asset type ranging from industrial to retail. We primarily focus on the top 35 MSAs (secondary and tertiary markets on a case-by-case basis) where we believe there is enough liquidity in the respective market to provide an efficient exit option should problems arise. The lack of options to monetize real estate in a tertiary market is amplified in an economic downturn when there is likely a capital flight to safer markets like gateway cities and generally more stable property types like multifamily and office.
Yieldstreet is able to paper our investment as a participation, but our preference is a note with a co-lender.
There are two ways we partner with our origination partners: a participation agreement, which means an economic interest in the loan, or a co-lender structure where we hold our own promissory note (one loan agreement). The advantage of having a co-lender structure is the ability for us to execute the deals that have lower yields, and then use leverage from different providers to offer a target return of 8-9% to our investors. We prefer the co-lender model because it allows us to do what we consider to be higher quality deals. We are also open to acquiring 100% of the loan from a partner but that is not our preference.
Requirements: Standard legal packages including appraisal, phase I, PCR, survey, etc.
Some lenders are able to close in extremely short timeframes, in some cases in under three days. Our underwriting process is detailed and time-consuming, but we work hard to provide accurate expectations for our partners and borrowers. For the average transaction, we generally assume a 3-4 week timeframe from signed term sheet to funding. We work to ensure that all of our bases are covered to protect our investors.
We can lend up to 80% Loan-to-Value (LTV)/Loan-to-Cost (LTC), but do not seek out ground-up construction.
With regards to a standard first mortgage loan, our LTV typically ranges from 65-75%. If we are in a mezzanine or preferred equity position, we are able to go up to 80% of the value of the asset(s). We are currently aiming to be more conservative given the overall market volatility. At all times, our number one priority is repayment of our investors’ capital.
In terms of ground-up construction, we tend to shy away from these types of loans due to our platform set-up and familiarity with construction. We are not well suited to step into a project that has run into issues and have to complete the work ourselves. Alternatively, we do seek out partners who possess this expertise. We are selective about our partners in the construction space and look for those who, in the event the borrower is unable to perform and complete construction, have a team in place to take over the project and see it through to completion.
We can take all or smaller amounts of the loan in the event the Originator would like to maintain exposure to the loan.
The partners that we work with all have different requirements for how much of the loan they want to keep on their own book and how much they want to syndicate. We have created a program with different lenders where we take different percentages of the loan based on each and every deal. This proves to be advantageous for our partners as they retain or syndicate amounts based on their capacity at the time. We are very flexible in this way.
Yieldstreet provides an ongoing strip of the coupon payment to Originators, essentially boosting their net yield.
We’re able to take 90% of the loan and provide an ongoing skim of the coupon (generally 25 to 75 basis points). For instance, if an Originator originates a loan at 10%, we buy the loan at 9.5% which typically results in significantly higher yield for our partners on their capital outlay. This is a way for them to have leverage on the loan while still being in a pari passu position.
We can take senior, subordinate, or a pari passu piece depending on the deal profile.
Every deal we review has a different risk profile. Each Originator has a different appetite. Either they are solving for being in a safe position and taking a very low yield, or they’re solving for much higher returns. We’re flexible and do not mind taking the senior position putting us in a low yield spot. We can also take a subordinate position or remain pari passu as is the case in the vast majority of our transactions. Given that we work across a broad spectrum of partners, this sets us and our partners up with the most flexible lending spectrum.
We provide capital to smaller Originators so they can do larger loans.
Many Originators starting out have 2-5 years of experience, executing consistent deals and have good track records originating loans ranging from $1M to $4M+. However, these Originators have the ability to do larger loan sizes but are capital constrained. This is where Yieldstreet plays a critical role in their growth. If an Originator only has $5M to put into a deal, we will provide the other $45M. We also pay them an ongoing servicing strip. This allows Originators to grow their businesses by doing larger loans without compromising on yield.
For larger funds, we can provide an avenue to syndicate loans from funds in the event the fund reaches capacity or due to geographic/asset type constraints.
A lot of larger funds that we work with have no capital constraints. The way we’ve worked with many Originators with these types of funds is by acting as the syndication partner if the fund reaches capacity. For example, if their fund limit for $2B has already been reached and a $100M deal comes along, we can provide that additional capital. Also, a lot of the funds have restrictions with regard to the geographies or asset types they can invest in. In this case, Yieldstreet can buy these loans to free up their capital for other deals.
Provide marketing for Originators through our website and extensive base of investors.
Yieldstreet offers value to Originators, especially up-and-coming Originators with 1-2 years of experience who want to get their name out there. We have over 300K members on our platform to whom deals are sent, highlighting the Originator and their track record. This ultimately makes the Originator a known name to our investor community, with whom they become more comfortable investing over time. We have seen this first-hand with our partner Avatar Financial Group. Avatar’s first deal took almost a full day to fill while their most recent deal was fully allocated in under one hour. Our members recognize the Avatar name now and are comfortable with it.
This communication and the information contained in this article are provided for general informational purposes only and should neither be construed nor 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. Any link to a third-party website (or article contained therein) is not an endorsement, authorization or representation of our affiliation with that third party (or article). We do not exercise control over third-party websites, and we are not responsible or liable for the accuracy, legality, appropriateness or any other aspect of such website (or article contained therein).
Sign up with your email address
Securely verify your identity and link a bank account
Verify your accreditation (if applicable) to access all of Yieldstreet’s offerings.
Our weekly podcast providing ideas about how to make money work for you and bring you closer to your dreams.
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" or "Annualized Return" represents an annual target rate of interest or annualized target return and "term" represents the estimated term of the investment. Such target interest or target returns and estimated term are projections of the interest or returns and or term and may ultimately not be achieved. Actual interest or returns and term may be materially different from such projections. This targeted interest or returns and estimated term are based on the underlying investments held by the 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.
7 The internal rate of return ("IRR") represents an average net realized IRR with respect to all matured investments 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 Sept 6th, 2021, after deduction of management fees and all other expenses charged to investments.
8 Investors should carefully consider the investment objectives, risks, charges and expenses of the Yieldstreet Prism Fund before investing. The prospectus for the Yieldstreet Prism Fund contains this and other information about the Fund and can be obtained by emailing [email protected] or by referring to www.yieldstreetprismfund.com. The prospectus should be read carefully before investing in the Fund. Investments in the Fund are not bank deposits (and thus not insured by the FDIC or by any other federal governmental agency) and are not guaranteed by Yieldstreet or any other party.
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.
Our site uses a third party service to match browser cookies to your mailing address. We then use another company to send special offers through the mail on our behalf. Our company never receives or stores any of this information and our third parties do not provide or sell this information to any other company or service.