November, 2020
The Broadmark Private REIT, LLC is pleased to report the results of our operations for the month ended November 30, 2020.
Monthly Return net of fees for month ended November 30, 2020: 0.85%
Assets Under Management at November 30, 2020: $50.6M
For further details please see the attached Fact Sheet.
Market Insights
Demand for residential housing remains strong. Second wave COVID-19 related “stay at home” measures are continuing to support home sales, as are new household formation from millennials and low interest rates. Real estate activity is seasonal, typically not as strong during the winter months, however the National Association of Realtors reports that third quarter 2020 home prices have increased since last year. Furthermore, the widespread rollout of multiple COVID-19 vaccines is expected to provide a positive economic catalyst which should stimulate further demand for homes.
Housing supply remains low, driving demand for new construction and construction financing. As measured by the St. Louis Federal Reserve, the supply of available houses for the month of October 2020 was again at historical lows, with just 3.3 months of inventory available in the United States, compared to 5.5 months in October 2019. This low inventory continues to drive new construction starts. The US Census Bureau reported that privately-owned housing starts in October 2020 were at a seasonally adjusted annual rate of 1,530,000, 14.2% above the October 2019 rate of 1,340,000.
Case Study
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: Refinance and Construction
Total Broadmark Realty Loan Commitment: $13,613,136
Property Location: Austin, TX
Month Funded: November 2020
The subject loan is a refinance and construction loan for 13 detached single-family condominium homes in the Bouldin Creek neighborhood of Austin, Texas. The loan amount is $13,613,136 and the appraised as-completed value is $21,355,000 with a loan to value ratio (LTV) of 63.7%. 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 proceeds of the subject loan will repay the existing loan and provide financing to complete the thirteen-unit project. The project will include two-, three- and four-bedroom homes which range in size between 1,191 and 2,374 square feet. The complex will feature a modern design and common amenity areas including a full-scale fitness center, coffee lounge and co-working space, bike storage, dog washing station, garage, carport and surface parking. The project is expected to appeal to professionals and young families looking for a modern, dynamic lifestyle.
The subject project is located in the Bouldin Creek neighborhood, a growth oriented market in South Austin catering to young tech professionals. The property is located along South 1st Street, a main arterial in the neighborhood, which is approximately one mile south of Downtown Austin and six miles east from Austin-Bergstrom International Airport. South 1st street offers a fun, eclectic mix of restaurants and shops, consistent with Austin’s slogan “Keep Austin Weird”.
The borrower is a respected urban developer and homebuilder with nearly 20 years of experience and over 135 employees. The guarantors have a high personal net worth and strong credit scores. They are repeat Broadmark borrowers.
If you have questions or would like to make an investment, please do not hesitate to contact me to request a copy of the Private REIT’s confidential private placement memorandum. We accept capital from qualified purchasers on the first of each month depending on availability and we are currently accepting investments for January 1, 2021.
We look forward to a healthy future.
As always, thank you for your support.
Jessica Disman
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.
