BY THE NUMBERS
Key Facts & Figures as of We lend inception since 2018*
Note: The facts and figures contained herein are representative of We Lend, LLCs performance. Past performance is not a guarantee of future results. *Data as of 11/08/2022
$455MM
Total Amount Funded
$0
Principle Loss
950+
Loans Funded
9.5%
Avg. Borrower Interest Rate
82%
Avg. Leverage at Purchase
250+
Loans Currently Co-Serviced
63%
Of Loans are Repeat Borrowers
Through We Lend, the management team has originated ~1,200 loans, a face value of $455MM+
Loans are primarily made to experienced real estate investors who are in the business of rehabilitating discounted investment properties
Principals invested personal capital into the fund
The Fund is run by experienced real estate investors & lenders who provide keen insight into how to be a creative and responsible lender
The Fund intends to sell selected loans in the secondary debt market. This enables The Fund to capture a yield (1.5% to 3.5%) at the sale while transferring the default risk & reinvesting the replenished funds, creating a higher alpha in the portfolio and minimizing risk
BY THE NUMBERS
Loan Characteristics
Note: The facts and figures contained herein are representative of We Lend, LLCs performance. Past performance is not a guarantee of future results* 2+ Investments
$381K
Avg. Loan Amount
12 Months
Avg. Loan Term
58%
Avg. Loan to After Repair Value
$2.6M
Avg. Borrower’s Net Worth
44
Avg. Age of Borrower
85%
Of Borrowers are Experienced Investors*
695
Avg. FICO Score
85%
Of Borrowers are Experienced Investors*
INVESTOR SECURITY
Principals invested their capital in The Fund alongside investors
Profit splits occur only after investors receive their preferred return
The Fund intends to sell selected loans in the secondary market, enabling us to capture a yield (1.5-3.5%) at sale while shifting the default risk, and reinvesting the replenished funds into another loan. The velocity of the fund-sell strategy allows for multiple transactions during the term, creating a higher alpha in the portfolio and mitigating risk
Safer part of the capital stack
Real estate-backed protection
Senior (1st) lien position
Loans are diversified geographically and across several resilient asset classes (residential focus)
Risk is spread across a portfolio of loans
Loans must meet our stringent underwriting guidelines & those of our institutional loan buyers. We place a lot of emphasis on loan-to-value ratios, asset location, borrower experience, borrower FICO, and/or asset class
We must fund institutional-grade loans to ensure the loans can be replenished through a credit facility and/or sold
The Fund retained Concept Fund Services (a division of Berdon LLP) to provide professional fund administration & reporting services, and we use FCI Lender Services to provide loan servicing & reporting services
Instant Cash-Flow. The Fund makes monthly distributions
Delivering attractive returns with first-lien protection and limited liability to LPs
Predictable and consistent returns
What's Next?
Velocity of Capital
The Fund intends to sell loans in the secondary market to institutional loan buyers and/or replenish the loans through a credit facility, enabling us to generate a higher yield & mitigate risk
Note: These statements reflect States Capital, LLC’s views and assumptions regarding future events and performance. All forward-looking statements address matters that involve risks and uncertainties. Accordingly, there are important factors that could cause States Capital, LLC’s actual results to differ materially from those indicated in these statements.
Higher Yield Illustrated:
A loan is funded to a borrower at 12%. The loan is then replenished at ~7.5% or sold at ~10.5%. Once replenished or sold, the capital is re-invested into another loan. While The Fund only retains a ~1.5% to ~4.5% spread, repeating this transaction multiple times a month/year generates a higher yield than 9.5%.
For example:
Let’s say we fund and sell loans once a month and we capture a 2% spread on each transaction.
2%spread ×12 months
=24%
Risk Mitigation
Selling the loan transfers the default risk to the note buyer
RATE OF RETURNS
PREFERRED RETURN
7%
TARGET ANNUAL RETURN*
10-14%*
TARGET IRR
12-22%
Growth of a $100,000 investment since 2018
TYPICAL LOAN CHARACTERISTICS
- FixNFlip
- Rental
- Multifamily
- New Construction
- Loans are primarily made to experienced real estate investors who are in the business of rehabilitating investment properties
Mandatory
15-35%
cash down payment by the borrower
- Short duration;
12 month loans - Extensions not guaranteed;
3-6 month intervals on case by case basis
- Non-owner occupied residential;
1-4 units - Multi-Family Properties;
4+ Units - Mixed-Use Properties
(Typically 50%+ Residential)
- Nationwide, with a primary focus on the
EAST COAST
Up to 85% of the acquisition price (compensating circumstances must exist for 90% leverage)
- 82% — Avg. Leverage at Purchase
- 57% — Avg. Leverage against the After Repair Value
Interest Rates range from
9-12%
Option to finance renovation
- If funded, the funds are not disbursed until the work is completed by the borrower. Subject to physical inspection
STRICT UNDERWRITING
6-point review: Our underwriting happens in-house. Being former real estate investors enables us to spot a bad loan and/or borrower very quickly
TYPICAL LOAN FUNDING PROCESS
Loan Origination
Borrower completes application with supporting documents
Processing
Processing dept collects supporting documents (i.e. PFS, SREO, SOW), pulls credit, conducts background & OFAC search, & orders appraisal
Underwriting
Underwriting dept reviews all documents, background searches, credit reports, appraisal, & validate property value
Credit Facility and/or Loan Buyer Review
If the loan is to be replenished through a credit facility or sold to a loan buyer, then the loan is discussed with that party for a second review and soft approval
Legal Review
Legal dept reviews title, property insurance, entity & other legal documents. Prepares loan documents and ensures compliance
Closing/Funding
Closing is scheduled, and the loan is funded
Loan Replenished or Sold
The loan is typically replenished through a credit facility and/or sold to a loan buyer
WHAT PRECAUTIONS IS THE FUND IMPLEMENTING TO REDUCE OUR EXPOSURE TO MARKET VOLATILITY?
Reduced our leverages, effectively requiring borrowers to have more skin in the game
Cash Flows: we analyze the property's current or potential cash flows to ensure that it will be sufficient to cover our mortgage and qualify for a refinance
Currently, 85% of our borrowers are institutional grade with high FICO scores, experienced, and HNW - we want to keep it that way
Market Adversity: we stress test the property’s appraisal to ensure that the loans we make are conservative enough to be secured against value fluctuations
WHY DO OUR BORROWERS NOT UTILIZE TRADITIONAL BANK FINANCING?
We fund loans in as few as 3 days. Borrowers use speed to their advantage when negotiating with their seller
Borrowers use a private lender as an advantage against mortgage contingent buyers
Traditional banks are unwilling to finance distressed properties
Traditional banks lack the experience & understanding of the real estate investment space
Banks have complex routines and procedures which make it difficult for the borrower to qualify
The Fund is run by experienced investors who can guide and consult the borrower through their investment process
WHY INVEST WITH US
- GPs are invested alongside their investors
- GPs are not earning profits from States Capital until the preferred return is paid to our investors
- $0 principal loss
- Real estate-backed protection
- Senior (1st) lien position
- Safer part of the capital stack
- The Management team has originated ~1,200 loans, a face value of $455MM+ (& currently co-servicing ~250+ loans)
- While the team originated ~1,200 Loans, we’ve denied 3,000+ Loan requests—we’ve seen a lot
- The Mgmt team were real estate investors, specifically in the FixNFlip space, which provides keen insight into how to be a creative & responsible lender
Selling loans enables States Capital to capture a higher yield while transferring the risk and reinvesting the replenished funds into another loan
Loans must meet stringent underwriting guidelines. We do not outsource our underwriting
- Loans are diversified geographically and across several resilient asset classes
- Risk is spread across a portfolio of loans
The Fund retained the services of Concept Fund Services (a division of Berdon LLP) to provide professional fund administration & reporting services, and FCI Lender Services to provide loan servicing & services
DISCLOSURE
This presentation for We Lend, LLC and any appendices or exhibits (the "Presentation") have been prepared by States Capital, LLC for information purposes only. This Presentation is confidential and for its intended audience only. Recipients of this Presentation may not reproduce, redistribute or pass on, in whole or in part, in writing or orally or in any other way or form, this Presentation or any of the information set out herein. This presentation does not constitute an offer to sell or a solicitation of an offer to purchase limited partnership interests in any security.
Any prospective investor is advised to carefully review all of the private placement memoranda, operating agreement, and subscription documents ("Investor Documents") and to consult their legal, financial, and tax advisors prior to considering any investment in States Capital, LLC. The materials contained in this Presentation contain a summary and overview of States Capital, LLC as currently contemplated by States Capital, LLC in order to obtain initial feedback from potential investors. States Capital, LLC may change some terms prior to the finalization of the Investor Documents. This presentation does not purport to be complete and is superseded in its entirety by the information contained in the Investor Documents. Past performance is not indicative of future returns or results. Individual investment performance, examples provided, and/or case studies are not indicative of the overall returns of States Capital, LLC.
In addition, there can be no guarantee of deal flow in the future. Some of the statements in this Presentation, including those using words such as "targets," "believes," "expects,'' "intends,'' "estimates,'' "projects,'' "predicts,'' "anticipates,'' "plans,'' "pro forma,'' and "seeks" and other comparable or similar terms are forward-looking statements. Forward-looking statements are not statements of historical fact and reflect States Capital, LLC’s views and assumptions as of the date of the Presentation regarding future events and performance. All forward-looking statements address matters that involve risks and uncertainties. Accordingly, there are important factors that could cause States Capital, LLC’s actual results to differ materially from those indicated in these statements. States Capital, LLC’s confidential private placement memorandum. States Capital, LLC believes that these factors include, but are not limited to, those described in the "Risk Factors" section of the PPM.
An Investment In States Capital, LLC involves Risk, And Numerous Factors Could Cause The Actual Results, Performance, Or Achievements Of States Capital, LLC To Be Materially Different From Any Future Results, Performance, Or Achievements That May Be Expressed Or Implied By Statements And Information In This Presentation. Actual Results May Vary Materially From Those Described In This Presentation, Should One Or More Of These Risks Or Uncertainties Materialize, Or Should Underlying Assumptions Prove Incorrect.
