The Broadmark Private REIT, LLC is pleased to report the results of our operations for the month ending May 31, 2020.
Monthly Return for month ended May 31, 2020: 0.71%
Assets Under Management at May 31, 2020: $10.8M
In May the Private REIT invested $3.8M in participations in 4 new and amended loans
For further details please see the attached Fact Sheet.
Broadmark Private REIT is newly-formed to invest in participations in selected first deed of trust loans to fund the construction and development of, or investment in, U.S. residential and commercial properties that are originated, underwritten and serviced by Broadmark Realty Capital (NYSE: BRMK). The Private REIT and BRMK, consistent with GAAP accounting standards, amortize origination fees over the life of the loan. In the past, the predecessor Broadmark Real Estate Lending companies applied loan origination fees paid by the borrower in the month that the loan is funded. Going forward, we believe that the new amortization schedule will result in monthly returns that are less dependent on the timing for funding of individual loans, as each month will include a percentage of origination fees from all loans in the portfolio. Over time we believe this change has the potential to reduce the variability of monthly returns.
Every month we receive questions from both current and potential investors regarding BRMK loans in which the Private REIT holds participations, such as types of loans, the types of situations where borrowers can profitably use BRMK financing, what BRMK looks for in borrowers and a variety of other relevant questions. In an effort to provide useful information we plan to profile one BRMK loan in which the Private REIT participated each month.1 Each lending situation is different and may not be representative of our portfolio generally. However, we hope these profiles provide current and potential investors with some insight into our methodology.¹
Loan type: Construction loan
Total BRMK Loan Commitment: $895,000
Property Location: North Port and Cape Coral, FL
Month funded: May 2020
The subject loan is for the construction of six single-family stand-alone homes. The loan amount is $895,000 and the appraised as-completed value is $1,392,000, with a loan to value ratio (LTV) of 64.3%. Consistent with BRMK’s lending practices, the entire loan amount is not released at closing. Funds are disbursed as construction draws as the project progresses. We believe BRMK’s draw process is detailed and includes third party inspections and lien releases through each stage of construction before additional funds are disbursed.
Two of the homes are in North Port, FL and the remaining four are in Cape Coral, FL. Each home is identical and will be a single-story ranch with a traditional design style and will include three bedrooms, two baths and 1,549 square feet of living space. The homes will feature a large island kitchen, master suite with walk in closet, 2 car garages, stainless steel appliances, granite counter tops, and a covered lanai.
North Port is midway between Sarasota and Fort Myers. It boasts 95 miles of freshwater canals and is also the only city in Florida that contains a state forest (Myakka State Forest) within its boundaries.
The North Port subject lots are infill lots within residential neighborhoods, located within 10 minutes of the Port Charlotte Town Center and within 5 minutes of the Central Business District. It is a nice residential neighborhood and within close-proximity of at least 13 schools ranging from elementary to high school.
Cape Coral is located near Fort Myers just north of the Caloosahatchee River, and is known as a boaters paradise for its over 400 miles of canals.
The Cape Coral subject lots are in residential neighborhoods 25 minutes west of Fort Myers, and 20 mins north of the Cape Coral’s Central Business District. They are also 5 minutes from a primary arterial for North Cape Coral that features numerous restaurants and retailers.
Both communities are attractive to retirees and families due to the multitude of recreational activities as well as their central business districts and good public-school systems. The appraised value per completed home is $232,000 and will appeal to either an investor looking for rental properties or an end user.
The borrower is a repeat client who has funded 15 construction loans with Broadmark Realty Capital and its predecessor funds. Eight of these loans have been repaid in full. He is an experienced developer and a seasoned investor; his company has built and sold over 80 new construction rental properties since its inception. He is professional, communicative, and has paid all interest payments on time. We are confident that the subject property will be completed on time and within budget.
Since 2016, the borrower has been a repeat client that funded 15 construction loans with BRMK and its predecessor companies to develop residential and commercial projects. Eight of these loans have been repaid in full. He is an experienced developer and a seasoned investor; his company has built and sold over 80 new construction rental properties since its inception. He is professional, communicative, and has paid his BRMK loans on time . His track record has been strong and we are pleased to finance his latest project.
We plan to provide monthly newsletters after each month-end. Because the Private REIT participates in loans originated by BRMK, a publicly-traded company, the timing and content of our disclosures is designed to be consistent with those provided by BRMK. Our goal is to provide you with helpful information regarding your investment in the Private REIT promptly, but may be delayed in order to align with disclosures by BRMK.
If you have questions or would like to make an investment please don’t hesitate to contact me to request a copy of the Private REIT’s confidential offering memorandum. We accept capital from qualified purchasers on the first of each month depending on availability and we are currently accepting investments as of July 1, 2020.
We look forward to a healthy future.
As always, thank you for your support.
Director of Sales and Marketing
Broadmark Private REIT
1420 Fifth Avenue
Seattle, WA 98101
Phone: (206) 623-1200 ext. 127
Broadmark Private REIT Management, LLC (the "Manager") provides this presentation to prospective investors on a confidential basis for informational and discussion purposes only. This presentation is not an offer to sell or a solicitation to buy preferred units of Broadmark Private REIT, LLC (the “Private REIT”). We will only make any such offering to qualified purchasers through the Private REIT’s current Confidential Private Placement Memorandum (the “Memorandum”). The Private REIT’s preferred units may not be eligible for sale in some U.S. states or countries, nor are they suitable for all investors.
The Private REIT is a private real estate finance company that primarily participates in short-term, first deed of trust loans secured by real estate that are originated, underwritten and serviced by Broadmark Realty Capital Inc., a publicly-traded REIT (“Broadmark Realty,” Ticker: BRMK). The Private REIT’s allocations of income, fees, and other amounts from participating in Broadmark Realty’s loans will vary based on applicable participation percentages.
The Manager calculates the Private REIT’s Monthly Return based on based on cash distributed to investors from loan origination fees and other fee-based income, less expenses and reserves, divided by total paid in capital, as of the end of each month. The Manager has broad discretion to determine distributable cash on a monthly basis. Assets Under Management are based on total paid in capital, less any permanent capital losses from loan participations.
Certain Risks. Real estate lending is speculative and entails substantial risks. As a real estate finance company, the Private REIT’s revenue and net income is limited to interest and fees received from participations in Broadmark Realty’s loans. The Private REIT’s ability to invest in additional loan participations is limited by the cash available to lend from new capital contributed by investors on a monthly basis. An investment in the Private REIT is speculative, involves substantial risk, and is suitable only for investors who can bear the economic risk of the loss of part or all of their investment. There can be no assurance that the Private REIT will achieve its investment objective or avoid substantial losses. The Manager does not guarantee the return of an investment or the performance of the Private REIT. Please carefully review the Memorandum, including “Certain Risk Factors,” for a general description of certain risks potentially applicable to an investment in the Private REIT. In making a decision to invest in the Private REIT, potential subscribers must rely on their own legal, tax and financial advisors in reviewing the proposed offering.
Historical performance data of Broadmark Realty is provided for illustrative purposes only. References to Broadmark Realty include its consolidated subsidiaries after a business combination which occurred on November 2019, and refers to the Pyatt Broadmark Real Estate Lending Companies I-IV for all periods prior to that date. The Private REIT was recently organized and has a limited operating history of its own upon which prospective investors may base an evaluation of its performance. Any loan data or performance information presented for Broadmark Realty is not the past performance of the Private REIT, and is not indicative of possible future results of the Private REIT. There is no assurance nor should it be assumed that the future performance of the Private REIT will achieve results comparable to the past performance of Broadmark Realty. PAST PERFORMANCE IS NO INDICATION OF FUTURE RESULTS.
The impact of the COVID-19 pandemic and the measures implemented to contain the spread of the virus have had, and are expected to continue to have, a material adverse impact on the real estate lending business and results of operations of Broadmark Realty and the Private REIT, including the ability of borrowers to complete real estate projects and make timely payments of principal and interest on loans.
Certain Conflicts of Interest. Potential investors should be mindful of the important differences between Broadmark Realty and the Private REIT as outlined in the Memorandum. The Private REIT will largely be dependent on Broadmark Realty to source, negotiate, and originate mortgage loans, and to foreclose on defaulting borrowers. The success of the Private REIT is largely dependent on Broadmark Realty offering sufficient attractive loan participations, and Broadmark Realty could elect to offer a higher (or lower) participation interest in any loan for any reason, which could result in conflicts of interest. It is possible that the interests of Broadmark Realty will at times conflict with those of the Private REIT, which could negatively affect its performance. There is no guarantee that the Private REIT will achieve results that will allow it to pay a specified level of cash dividends or to increase the level of such dividends in the future similar to Broadmark Realty. The Manager may be delayed in reporting performance or other information relating to Broadmark Realty’s loan portfolio until after certain financial information has been publicly filed by Broadmark Realty. The Private REIT’s preferred units are subject to substantial restrictions on redemptions, including a one-year initial lock-up period and quarterly limit on the total amount redeemed, and are not eligible to be transferred or resold to the general public.
Vigilant Distributors, LLC, SEC-registered broker-dealer and FINRA member, serves as placement agent with respect to the offer and sale of the Private REIT’s preferred units. The Manager has elected to pay Vigilant Distributors’ fees for the initial year of the Private REIT’s operations. Certain of the Manager’s personnel are Vigilant Distributors -registered representatives who market the Private REIT’s preferred units. The Manager’s personnel are also employees of Broadmark Realty. Broadmark Realty has adopted a bonus policy for eligible employees based on various performance factors, including contributions to the growth of the Manager. The Private REIT and the Manager have engaged independent selling broker-dealers and web-based platforms to market the Private REIT’s preferred units. The Manager (not the Private REIT) pays platform fees and expenses, and also pays to any independent broker an upfront fee equal to 1.00% of a subscriber’s invested capital and, after the first anniversary thereof, an annual fee equal to 0.50% of the subscriber’s invested capital. Due to the compensation paid, these persons have a conflict of interest in recommending the Private REIT to potential investors.