The universe of real estate transactions available on Percent expands significantly with the addition of Sharestates, a national private lender focused on non-owner occupied residential and commercial properties.
Founded in 2013, Sharestates has successfully funded more than $3.5 billion in projects nationwide, creating customized lending solutions for real estate developers. It provides an important source of private capital to real estate investors seeking short-term bridge financing for rehabilitation projects and long-term Debt Service Coverage Ratio (DSCR) loans to rental properties.
Delivering value to investors and developers
The initial impetus for Sharestates was to make real estate investing more accessible by syndicating transactions to a broader investor base. Over time, Sharestates identified a corresponding need and began providing a much-needed lending product to real estate developers.
With traditional banks either moving too slowly or not understanding these projects, and larger funds focused on $20M+ transactions, Sharestates addresses a fundamental market need to finance mid-sized construction and value-added projects. The firm focuses on business purpose financing in the $100k – $15M range, delivering scale that local lenders typically can’t meet.
By nationalizing private lending, Sharestates has created a path for large institutional dollars to enter the space and fully support the needs of developers.
Investing in real estate loans
Real estate debt investments offered by Sharestates are available to institutional and accredited retail investors. Secured by the property, these high-yield investments offer above-market returns for short-term investments. Sharestates investors have typically earned an average annualized return of 9 – 11% with principal repayment occurring within 10 months of investment. As part of Sharestates’ commitment to full transparency, investors have access to a wealth of details about each underlying loan.
Lending based on stringent assessment criteria
Sharestates employs a rigorous underwriting and risk assessment process for each potential real estate investment project. Every borrower and underlying property is evaluated against 34 data points across nine different underwriting categories:
- Loan-to-value (LTV) ratio
- Lien position
- Development phase
- Sponsor’s track record
- Sponsor’s experience
- Sponsor’s credit score
- Sponsor’s personal guarantee
Additionally, well-established and detailed underwriting and servicing guidelines and processes ensure a standardized review process for every loan. From individualized checklists to specific requests for appraisals and bank statements, every underwriting file is checked for accuracy and completeness.
Identifying industry trends
Sharestates sees three primary factors influencing the overall housing market in 2023: inventory, rates, and price. Despite low inventory, demand for purchases has decreased as prices and mortgage rates stay elevated. A shift toward rental properties will persist and, while the fix-and-flip market hasn’t dried up entirely, investors will need to look harder to make their deals work.
Meanwhile, multi-family owners with maturing debt and expiring interest rate caps will face liquidity pressure, creating an opportunity for Sharestates to bridge the gap with private loans as traditional lenders remain on the sidelines. With less liquidity in the market, the firm expects strong origination over the next 24 months, creating new loans with low leverage and high yields.
Through the relationship between Sharestates and Percent, investors gain more opportunities to diversify their alternative investment portfolio with private real estate debt transactions. A broader investor base aids Sharestates’ borrowers in securing critical financing while Percent investors may benefit from additional investment opportunities with attractive tenors and yields.