Real Estate Crowdfunder Patch of Land Returns $25 mn to Investors

Patch of Land has returned $25 million to investors this year, a quarter of its originations at $100 million.

The LA-based online lender for real estate loans also expanded its business to Hawaii, marking its presence in 36 states. The company uses a data-driven underwriting model and promises investors a risk adjusted return with extensive available data to support the underlying credit decision on each loan.

Earlier this month, Patch of Land started selling mid-term loan option for 2-5 years starting at 6 percent, extending its typical short-term loans  starting at 10 percent for up to two years. It sells ‘bridge loans’ ranging from $100,000 to $5 million to cover the borrower until they can secure permanent capital or those who may not immediately qualify for long-term financing on properties that they rehabilitate and then hold as rentals. As far as demands for these loans go, the company’s CEO Jason Fritton said bridge loans generated $40 million in loan interest in less than two weeks since. 

The three year old startup signed a $250 million agreement with an east coast based credit fund to purchase its loans in a forward flow arrangement. Last year, it raised a million in seed funding and $125,000 in debt in 2014, followed by $23 million in Series A funding last year when it  funded more than 200 projects, with an average blended rate of return to investors of 12 percent.

CEO of  RealtyShares, a real estate crowdfunding platform Nav Atwal in a Forbes post said enlisted reasons why commercial real estate is investor friendly — 12 percent annual returns, tax benefits, hedge against stock market and inflation being some of them. But for larger context, the commercial real estate environment is of caution among lenders towards big projects. Real estate firm CBRE said that it “conservatively” estimates that 18 percent of loans this year and 29 percent of loans next year to have refinancing problems as investors move away from commercial real estate bonds. CBRE estimates $43 billion to be in “troubled loans” over the next two years.