The Broadmark Private REIT, LLC is pleased to report the results of our operations for the month ended May 31, 2021.
Monthly return net of fees for month ended May 31, 2021: 0.51%
Assets under management at May 31, 2021: $87.5M
For further details please see the attached Fact Sheet.
New housing permits remained near 15-year highs, indicating sustained activity in construction as builders attempt to address the continued need for more housing stock. The National Association of Realtors issued a report in June calling for a “once-in-a-generation” response that is needed to address the housing supply shortage. The report called upon policymakers to remove barriers to new development and to address housing construction as a part of any national infrastructure plan. The Wall Street Journal, commenting on the report, noted that the market needs 5.5 million new units to remain in line with historical levels. According to the Federal Reserve Bank of St. Louis, the monthly supply of housing continues to hover near historic record lows, with current supply representing only 4.4 months of demand.
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: Vertical Construction
Total Broadmark Realty Loan Commitment: $13,310,388
Property Location: Denver, CO
Month Funded: May 2021
The subject loan is for the vertical construction of Phase 1 of a memory care facility in Denver, Colorado. The loan amount is $13,310,388 and the appraised as-completed value of the project is $22,500,000 with a loan to value ratio (LTV) of 59.2%. Consistent with Broadmark Realty’s lending practices, the entire loan amount is not released at closing. Funds are disbursed as construction draws as the project progresses. We believe Broadmark Realty’s draw process is detailed and includes third party inspections and lien releases through each stage of construction before additional funds are disbursed.
The subject project is called Cherry Tree Estates, an independent senior living and memory care development in Denver, Colorado. The project consists of two phases. Phase 1 will include 21 independent senior living townhome units ranging from 1,350 to 1,650 square feet, two memory care buildings with 16 units each, and a clubhouse for social amenities.
This phase will also include horizontal improvements associated with the future Phase 2 of the development. The horizontal development will include site preparation and utility work for 24 townhomes and 5 memory care buildings. Upon completion of phases 1 and 2, the project will offer 112 beds for secured assisted living and memory care and a clubhouse/community center.
The project is located in the Indian Creek neighborhood of Denver and provides easy access and visibility, ideally suited for a senior living community. It is in close proximity to other residential properties, multiple shopping centers, coffee shops, and parks.
Senior housing represents a large and growing development opportunity supported by long-term demographic trends and with the potential to generate stable attractive cash flows.
The borrower, a new Broadmark customer, is a veteran construction and real estate developer in the independent senior living and memory care space. His concept for senior living is to develop small intimate, individual living spaces and make it feel like home.
The borrower’s company is very active with the local chapter of the Alzheimer Association. They sponsor several events with the Association each year, have a great reputation in the Denver market and business relationships with several geriatric clinics, local hospitals, and placement agencies.
The borrower also has established banking relationships in place to provide takeout financing once construction is complete.
If you have questions please do not hesitate to contact us to request a copy of the Private REIT’s confidential private placement memorandum. We are not taking new investments at this time.
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.