Real EstateJLJ Capital

Northern Virginia Office Financing

Annual interest3

Final term3

12 months

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Status

Fully repaid

Recently funded

Accepting $10,000 - $20,000 investments

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Accepting $10,000 - $20,000 investments

Overview

Invest indirectly in a $12.75M first mortgage loan secured by a 9-story, suburban office building in Falls Church, VA. The property is located in the Washington “off-metro” area, within five miles of Amazon’s HQ2 and the Pentagon. The property is within an opportunity zone and is within the I-395 Corridor submarket, which is generally considered to be a more affordable alternative to downtown Washington D.C. The property may benefit from the increased rent pressure pushing both public and private sector tenants to seek more affordable yet accessible locations with large block availability.

The borrower is a real estate investment firm that specializes in the purchase of distressed commercial real estate and repositioning of such assets. Since its inception, the borrower has acquired over $2B of real estate, totaling 16M SF across 50 markets. The Government Service Administration (GSA) has a lease, representing 31% of the property, that expires in 2025. Including the other tenants, total occupancy is 39%. The borrower’s business plan is to increase occupancy and refinance at a lower borrowing rate upon property stabilization. Yieldstreet underwrote the loan with the expectation that additional occupancy would not be required in order to be repaid.

Investors are scheduled to receive monthly interest payments at an 8.5% targeted annualized yield. The loan has 18 months remaining on its initial term with the option for one 12-month extension. Principal is expected to be repaid upon refinancing or sale of the property.

Slide 1 of 3
  • Yield

    Gross Yield

    9.63%

    Yieldstreet Fee

    1.13%

    Target Yield

    8.5%

    Interest Type

    Actual 360

  • Schedule

    Payment schedule

    Monthly Interest

    Prefunded

    Maturity

    Date

    Initial Target Maturity

    Feb 1, 2023

    Extended Target Maturity

    Feb 1, 2024

  • Structure

    Tax document

    1099-INT

    Offering structure

    Expenses

    First Year Expense

    $100

    Annual flat expense

    $30

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Essentials

Please refer to the Series Note Supplement for more details about this offering.

Capital Structure

Where does the Yieldstreet lie in terms of priority?

Yieldstreet and JLJ (collectively, the Lenders) have funded a $12.75M first mortgage loan. Yieldstreet holds a $7.1M promissory note alongside JLJ, which holds a $1.5M promissory note. Yieldstreet obtained senior financing for a portion of its note, which is expected to amount to $2.5M initially and $3.7M when fully funded. As a result of the senior loan, Yieldstreet will be junior to the senior lender.

The initial offering, launching on 2/11/21, is for $4.6M. If and when future funding occurs, Yieldstreet is expected to offer additional tranches.

Cash Flow

How do I get paid?

Investors are scheduled to receive monthly interest payments at an 8.5% targeted annualized yield. The loan has 18-months remaining on its initial term with the option for one 12-month extension. Principal is expected to be repaid upon refinancing or sale of the property.

Assets

What is the collateral underlying the transaction?

The property is a 315k SF, 9-story office building located in Falls Church, VA, within five miles of Amazon’s HQ2 Campus and the Pentagon. It is within an opportunity zone and is within the I-395 Corridor submarket, which is generally considered to be a more affordable alternative to downtown Washington D.C. The property’s anchor tenant is the Government Services Administration (GSA), which indicates the building is GSA-compliant. As of December 2020, occupancy was 39%. The borrower’s business plan is to capture leases priced out of the market due to increased rents from the arrival of Amazon to Crystal City, in Arlington, VA.

Highlights

Collateral Coverage
Strong Anchor Tenant
Deal Structure
Experienced Originator
Experienced Borrower
  • The Lender’s initial $8.6M loan has a basis of $27/SF. Newmark Knight Frank’s December 2020 appraisal determined an “as-is” valuation of $25.5M, or $81/SF. Based on the appraised “as-is” valuation, the Lender’s loan funded at closing has an LTV of 33.7%. The property was acquired as part of a distressed portfolio sale, which should allow the borrower to price rents competitively, ultimately driving demand.

  • The anchor tenant is the Government Services Administration (GSA), with a lease ending in 2025 and accounts for occupancy of 31%. The GSA lease generates monthly rental income of $265k, or $3.2M per annum. Importantly, the GSA lease does not contain a termination clause and is not subject to appropriations.

    The principal of the borrower is personally liable for all obligations under the loan in the event that the borrower modifies or terminates the GSA’s lease without the lenders’ consent or if the GSA permanently ceases paying rent due to the borrower’s actions.

  • While the loan is outstanding, excess cash flows from property operations up to a net debt yield of 13% per annum ($1.1M per annum based on the initial $8.6M loan) are required to be trapped in an account controlled by the Lenders, who have a first priority lien on the funds. Funds will be held in this account until new leases are signed for tenant improvement and leasing commissions, and otherwise act as additional collateral for the loan.

    As of 12/31/2020, the property is approximately 39% occupied. Besides the GSA, the other tenants are contracting companies, with leases ending between 2021-2025. The borrower is currently in active negotiations with two potential tenants, a law firm and a subsidiary of the GSA tenant, for combined space of 37k SF. The borrower expects the law firm lease to be executed with a high degree of likelihood. As of 1/31/21, in-place rents were $316k per month or $3.8M per year. The annual underwritten net operating income is $2.1M, which covers debt service payments of $752k and the full $1.1M cash trap.

  • JLJ’s management team has 30 years of lending and operational experience in various real estate. This experience allows JLJ Capital to follow commercial banks’ underwriting standards while moving quickly in origination and execution with robust deal flow through established relationships with real estate developers, owner’s operators, brokers and servicers. JLJ utilizes experts in Architecture, Engineering and Construction to review all loans before approval.

    As of 2/9/21, JLJ has originated 26 loans in the amount of $278m. It has over $60m in its current portfolio.

  • The borrower is a New York-based commercial real estate investment firm focused on opportunistic transactions in all asset classes and geographies in the USA. The borrower focuses on strategic asset repositioning, targeted capital improvement plans, and asset management. Since its inception, the borrower has acquired over $2.0 billion in real estate totaling approximately $600M in equity deployed for 18 million square feet across over 50 markets. As of December 2020, the borrower’s AUM was over $700M. As per the Principal’s personal financial statement as of 12/1/2020, the Principal had net worth of over $100M and liquidity of over $5M.

Resources

This offering page describes only certain aspects of the offering ("Offering") of the securities issued by YS AltNotes I 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.