The LendIt Conference in New York this year just released their agenda, with an entire track dedicated to real estate online lending. I figured it's a good time to share some of the research I've had done and some of my general thoughts.
First, if you’re really into learning about the real estate outlook (outside of the platforms – the asset class in general), PWC and Urban Land Institute puts together a comprehensive outlook on the real estate sectors, investment and development trends and finance and capital markets across the US and Canada - Emerging Trends in Real Estate. Their report deeply dives into nearly all the factors that will affect the real estate market outlook – employment trends, generational living proclivities, investing and capital market trends, federal movement (political and interest rates). It’s a bit lengthy, but between that and the data below you’ll be totally prepared for any of the panels at LendIt.
Back in January, the Huffington Post had an article that listed all of the US Real estate lending platforms. They found 75 companies, with another 15 that were in progress. I had the fine folks at SourceScrub, gather some data about these companies – websites, descriptions, locations, founding dates, money raised, etc.
It's a pretty diverse group - distressed asset players, large buildings (condo/apartment complexes), Office buildings, mixed use, house flippers, etc. A couple of players in there are old (in terms of the internet), who have found ways to make a decent online presence. The Carlton group has been around since 1991, and in 2014 they launched a crowd-funding platform - a bit behind, but as a firm they have as strong history in both investing track record and asset gathering.
I have a few favorites:
I think FundRise is one of the top players, they have raised a ton of capital, and their management team has deep experience in real estate financing and development. Their recent offering of World Trade Center 3 bonds (triple tax exempt for those keeping score) is the coolest offering I’ve seen on any of the platforms. I also prefer their strategy of getting large projects by developers with good track records. They have also started pre-funding their deals – that shows a lot of faith that their underwriting is producing deals that investors will like. It’ll also be huge in that struggle at scale to get borrowers / developers to sign up with their platform vs another. Anything to reduce friction. Hopefully that’s off balance sheet, but if not, that’s all right I suppose, they can get there eventually
AssetAvenue is in a pretty similar situation – a bit behind FundRise. I’ve spoken with CEO David Manshoory on a number of occasions – he’s not a guy I would bet against, and I suspect he’ll catch up pretty quick.
Some of the other platforms that have a lot of single-family homes, single commercial spaces and flips give me a bit of a pause – it might be a personal hiccup, but I’m less comfortable signing up for a property that will have a single source of income or are hoping for a large ROI on a flip – bad experience perhaps.
From speaking with many of the more recent platforms, most of them are still trying to standardized their underwriting criteria - they are still working to match investments on their platform to investor dollars, which is expected at their early stage. That'll change in time, as the platforms mature and investors get more confident in an index model (like what has happened in consumer lending). I’ll be pleasantly surprised if any of the platforms get to the point of providing an offer / rate on the spot like consumer lending – I just don’t think the real estate underwriting will every have enough on demand data.
I'm excited to get the opinions of those who are closer to the real estate ecosystem.