Loan Recovery Case Study: Miami Pre-Development Financing

March 26, 20212 min read
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Abstract banner showing Miami, site of pre-developing finance deal on Yieldstreet investment platform

In June 2019, we launched Miami Pre-Development Financing on the Yieldstreet platform. Investors had the opportunity to invest in a junior position of a first mortgage loan backed by 6.2 acres of land located in the Brickell section of Miami, Florida. As part of the transaction, the originator, Ascend Real Estate Partners (“Ascend”), secured $35M of senior financing from a large midwestern bank (Senior Lender). Of the $20M subordinate piece, YS SPV investors took $15M (75%) and Ascend held $5M (25%). The offering had an expected duration of 12 to 24 months, with a target annualized yield of 8.25% to investors.  

The financing package had an initial 12-month term with two 6-month extension options subject to certain conditions (including meeting an LTV rebalancing provision and replenishing interest, tax and insurance reserves) being fulfilled. In June 2020, the Borrower requested, and was granted, the first 6-month extension after funding the required interest reserve and tax escrow. 

In December 2020, the Borrower sought to exercise its second 6-month extension option but did not satisfy the conditions necessary to extend the loan’s maturity – namely a $3.5M required principal paydown – and as a result, a notice of default was issued to the Borrower. Given Yieldstreet and Ascend’s high level of confidence in the value of the collateral backing the investment, we moved quickly to fund an approximately $4.8M protective advance on our investors’ behalf. This advance kept the senior loan compliant with the required payment terms and thus prevented the senior Lender from enforcing its rights over the loan or impairing the junior position.

We are pleased to announce that, through our successful workout strategy, we were able to achieve 100% recovery of investor principal and outstanding interest at the target yield. 

As noted, we believed that the Borrower had both the capacity (net worth of over $1B with $20M of liquidity at the time of the investment) and the incentive (a significant amount of equity invested directly in the property) to pay. Yieldstreet’s collateral position remained strong and we continued to have conviction that a resolution would be reached in a timely manner. Our thesis proved correct, as the Borrower was able to secure a third-party refinancing for an amount greater than our loan balance and the investment was repaid in full within 90 days of calling the Event of Default. 

Infographic detailing how borrow repayment works in a loan modification case study

To learn more about our due diligence process, please review our post on our loan workout process and our recovery case studies on Irwindale Industrial Financing and Orlando Hotel Portfolio

As always, for any additional questions you may have regarding Yieldstreet offerings and our workout process, please reach out to us at [email protected].