By Guglielmo de Stefano on Friday 19 February 2016
East Coast credit fund signs an agreement to invest $250m through Patch of Land.
Real estate crowdfunding platform Patch of Land has announced the closure of a $250m agreement with an East Coast credit fund. According to the platform, the institutional investor will purchase loans in a forward flow arrangement. The deal would represent the credit fund’s first move into the P2P marketplace lending space.
The platform was founded by Jason Fritton - together with his brother Brian and Carlo Tabibi - motivated by a desire to repair communities across the US, devastated by the 2008 real estate crash and the necessity to make sure it didn't happen again.
It offers various types of secured real estate debt and then matches investors seeking alternative fixed income opportunities to borrowers seeking alternative sources of financing. In less than two years, it has funded almost 150 projects, prefunding and then crowdfunding more than $40M with an average rate of return of 12.2%. The company recently announced it has returned $10M to investors since its inception in 2013 - with no defaults on loans to date.
The agreement marks a significant milestone for Patch of Land as it supports the firm’s rapid origination growth. Jason Fritton commented:
“We are thrilled to announce this important milestone for the impact it has in the online real estate financing space. Patch of Land will now be able to fill loans on a programmatic basis, creating a higher level of validation for the entire industry.”
Patch of Land argues that this kind of institutional agreements is clear evidence of the quality of products offered and of the scalability of its investment opportunities. On the borrowers front, the platform commits to accelerate its borrower funding, expanding its opportunities with new sponsors, brokers and even local lenders. Although the investment stands out for its size and for its source, Patch of Land is keen on highlighting that its individual investors will still be hugely important moving forward
“The crowd - our individual accredited investors who have thus far provided over 95 percent of our loan funding - remains a priority to the company. We will continue to deliver quality product for the portfolios of large institutional players and the thousands of accredited investors who invest in our loans every day.”
This agreement is a big institutional vote of confidence for Patch of Land and should help it fulfil its mission to solve the problem of slow and inefficient private real estate lending. This deal is also a sign that proptech is rapidly becoming a major force within the institutional alternative credit space.