Overview
Performance Update
• View the most recent update for Portland Multi-Family Financing.
A mezzanine loan backed by an under construction multi-family property in Portland, Oregon.
A mezzanine loan backed by an under construction multi-family property in Portland, Oregon.
- Attractive income: A real estate debt offering that is generating expected monthly interest above traditional fixed income. Half of the interest is paid current and the remaining half will compound and accrue with deferred payment occurring at maturity.
- Repayment guarantee: Since closing on this transaction in April 2022, the construction budget on this project has increased due to certain increased costs associated with the project. In lieu of requiring the Borrower to increase the remaining construction contingency account with new equity, Yieldstreet has received a $2M repayment guarantee of the loan, jointly and severally, from the Borrowers.
- Asset backed: The loan had a loan-to-cost ratio of 80% at close, and is expected to fall as the value of the project increases and construction progresses, creating a buffer for investor capital in the event that the borrower fails to meet repayment obligations.
- Market backdrop: Demand for rental units in the Northwest Portland submarket is strong given the low-supply of single-family homes, coupled with the fact that potential buyers are priced out due to rising mortgage rates and prices. This dynamic should allow the borrower to sell the property at an attractive future price with the proceeds being used to repay the loan.
- Experienced developer: The property is being developed by Oregon’s largest family-owned construction manager and general contractor, with extensive experience developing multi-family properties in Portland. Construction of the multi-family development began in April, 2022 and is 22% complete as of 9/30/2022, in-line with the construction timeline at closing.
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Premise
Investing details
Investing details
What am I investing in?
- A mezzanine loan backed by an under construction multi-family property consisting of 124 multi-family units, a ground floor retail space and 34 parking spaces in Portland, Oregon. The guarantors of the mezzanine loan will provide an unconditional guarantee of lien-free completion to Yieldstreet. In addition as a mezzanine lender, we have specific remedies under the Uniform Commercial Code (UCC) that allow us to foreclose on a property ahead of the senior lender if the borrower defaults on the terms of their loan.
- As a real estate debt investment, investors can expect steady income payments via interest paid by the borrower, as well as a shorter hold time than typical equity investments.
- The loan had a loan-to-cost ratio of 80% at close. As construction progresses the loan-to-cost ratio is expected to fall as the value of the project increases, creating even more of a cushion for investor capital in the event that the borrower fails to meet repayment obligations.
- The borrower has contributed $10M of their own equity into the project in a first loss position. This “skin in the game” demonstrates alignment of interests because they only generate a return if the lenders are fully repaid.
- We believe the strong demographic and economic fundamentals demonstrated by Portland will see the property stabilized by September 2025, shortly after which the borrower anticipates a sale of the property at an attractive price with proceeds being used to repay the loan.
Investment strategy
Investment strategy
What is the value proposition?
- The mezzanine loan is being used to finance the property’s development. The target net annualized yield of the offering is well above traditional fixed income investments. To date, the investment continues to make monthly interest payments to investors as scheduled.
- The borrower’s business plan is to complete construction of the asset and sell it following stabilization in year 3, at which time principal will be repaid to investors. Construction commenced in April 2022, and as of September 2022 the property is 22% complete which is in line with the borrower’s projected timeline.
- The property is located in Northwest Portland and is a popular location for renters as its proximity to major employment and retail nodes creates a live-work-play environment.
- The property is one of the last multi-family properties that can be built in the area without a portion of units set aside for affordable housing due to the Inclusionary Housing Act. Looking ahead, this project, alongside one other project, are the only projects that are expected to deliver in the foreseeable future.
- This is expected to increase the sale price of the property at the time of eventual sale, which increases the likelihood of full loan repayment as sale proceeds will be used to repay the outstanding amount owed.
Behind the investment
Behind the investment
Who is the developer?
- The property is being developed by Oregon’s largest family-owned construction manager and general contractor, with extensive experience developing multi-family properties in Portland. Regardless of whether the general contractor is able to honor the guaranteed maximum price, it is the guarantor's obligation to ensure completion of the project.
- In the last 10 years, the general contractor has built 45 projects totaling more than $1.7B in contract value. Currently, the general contractor has 19 active construction projects underway.
- On August 26, 2022, the borrower indicated that the construction budget is going to increase for the project due to inflation and labor shortages. The increase is not expected to exceed the construction contingency account that was reserved at closing to cover unforeseen cost increases. If cost increases exceed the construction contingency reserve, the borrower is responsible for 100% of the costs.
- Should the borrower become unable to meet their repayment obligations, the sale value of the collateral would be expected to recover significant capital.
Market backdrop
Market backdrop
Why should you consider investing?
- The project site is in the Slabtown neighborhood of Northwest Portland, directly adjacent to the Pearl District and 2 miles from Downtown Portland. Renters are drawn to the area so that they can be close to major employers such as Nike, Intel, Amazon, Adidas and Lululemon.
- The Northwest Portland submarket has experienced sustained investment from developers over the past decade with multi-family stock increasing 68% over that timeframe. Demand has kept up with the significant increase in supply as absorption has been net positive at 4.2% per year (average over the last 3 years).
- CoStar expects vacancy to fall ~4% over the next 3 years in Portland as the recently delivered supply continues to be absorbed. Rents are expected to grow at 4.9% per year over the same time period.
- All these factors combined suggest that demand for rental units will be strong given the low-supply of single-family homes, coupled with the increase in mortgage rates. Given the expected demand for rental units and upward trending rental prices, we believe the borrower will be able to effectuate a sale of the property in Year 3 at an attractive future price. Sale proceeds will be used to repay the loan.
Essentials
Please refer to the Series Note Supplement in the Documents section for more details about this offering.
Please refer to the Series Note Supplement in the Documents section for more details about this offering.
Capital structure
Capital structure
Where does Yieldstreet lie in terms of priority?
- Yieldstreet has provided the entire $11.6M mezzanine loan.
- The senior loan was provided by a publicly listed U.S. bank with $180B of AUM.
- The Mezzanine investment is senior to approximately $10M in equity provided by the borrower.
Cash flow
Cash flow
How do I get paid?
- Net of Yieldstreet’s management fee, and other fees and expenses as described in the Series Note Supplement and the Indenture, investors are expected to earn a target net annualized yield paid monthly. Target yields are not referenced to past performance, are not guaranteed and results may differ materially.
- The loan has 30 months remaining, with the option for one 12-month extension.
- ~50% of interest will be paid on a current monthly basis, the remaining ~50% will compound and accrue with deferred payment occurring at maturity in 36 months time, along with principal repayment.
Accessibility
Accessibility
Who can invest?
- The offering gives investors debt exposure traditionally offered only to institutions, family offices, and ultra-high net worth individuals.
- Eligible investors must certify that they are Accredited Investors.
Returns & Management fees
Ann'l management fee
1.25%
Target ann'l net yield
Login to viewMultiple on invested capital
~1.4x
Schedule
Payment schedule
Monthly
Term remaining
27 months
Extension options
1, 1-year
Structure
Tax document
1099-INT
Offering structure
BPDN
Ann'l flat expense
0.25%
Other fees set forth in the Series Note Supplement and the Indenture
This offering page describes only certain aspects of the offering ("Offering") of the securities issued by YS ALTNOTES II LLC ("Issuer"). The Offering is made only by means of the Private Placement Memorandum dated January 14, 2022 and the Series Note Supplement relating to the Offering (collectively, the "Offering Documents"). The information on this offering page is a summary of the Offering, does not purport to be complete and should not be considered a part of the Offering Documents, or as incorporated in the Offering Documents by reference or as forming the basis of the Offering. No person has been authorized to give any information or to make any representations other than those contained in the Offering Documents or in any marketing or sales literature issued by the Issuer or Yieldstreet Management, LLC, as adviser thereto, and referred to in the Offering Documents, and, if given or made, such information or representations must not be relied upon. All investors must read the Offering Documents in their entirety prior to investing in the securities.
Investing in private markets and alternatives, such as this offering, is speculative and involves a risk of loss, and those investors who cannot afford to lose their entire investment should not invest. Returns are not guaranteed.
Investing in private markets and alternatives, such as this offering, is speculative and involves a risk of loss, and those investors who cannot afford to lose their entire investment should not invest. Returns are not guaranteed.
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]