Patch of Land

Patch of Land
Online real estate crowdfunding
Founded 2012 (2012)
Headquarters Los Angeles, CA, US
Website patchofland.com

Patch of Land is an online peer-to-peer or 'peer-to-professional' real estate crowdfunding marketplace that connects professional real-estate developers needing to finance their real-estate projects to willing lenders or real-estate investors. Patch of Land focuses uniquely on relatively short-term (typically 6–24 months) real-estate debt or fixed-income loans (as opposed to real-estate equity investments) and, like a mortgage, all their debt-investments - offering returns typically between 8% to 14% annually - are fully secured via first lien by the underlying real-estate property, as well as a personal pledge by the borrower.

History

Patch of Land brought real-estate bridge financing, also sometimes known as "hard money lending," nationwide and online. In hard-money or real-estate bridge financing, a loan is both secured-by and determined-by the value and quality of the underlying property rather than [exclusively] by the creditworthiness of the borrower, as with more conventional lending. Real estate bridge-financing has historically been an inefficient, offline, hyper-local market where lenders must personally know who the best local real-estate developers are, and which tracts of land, parcels, buildings, properties, streets or neighborhoods offer the most promise for price stability and appreciation. Conversely, real-estate developers needing funds for their projects were historically forced to seek-out and pursue local financiers, magnates, bankers, capitalists or other lenders rather than spend time doing what they know best: construction & renovation.[1]

Patch of Land and other online real-estate crowdfunding pioneers enabled real-estate developers to focus their time and effort on identifying real-estate opportunities, building, renovation, and construction rather than compiling paper loan-documents or foraging for willing lenders. At the same time, Patch of Land also enabled accredited investors wishing to invest in real-estate as an asset-class (as opposed to as one's primary home) without needing a prohibitive amount of freely available investible funds.[1]

Patch of Land was initially established by Jason Fritton, Brian Fritton and Carlo Tabibi in 2012 in Los Angeles, California shortly after congressional passage of the United States JOBS Act making it one of the earliest providers of online Real-Estate Crowdfunding.[2] Jason Fritton of Patch of Land was among those who lobbied the US Congress for the inclusion of real-estate crowdfunding in the final draft of the JOBS Act.[3] AdaPia d'Ericco (Chief Marketing Officer)[4] and Amy Wan (General Legal Counsel)[5] were among Patch of Land's early employees.

During the summer of 2016, as the company expanded, Patch of Land hired Paul Deitch from Oaktree Capital Management as CEO[6]

Unique aspects

Patch of Land's products differ from equity-investments or unsecured-loans such as those offered by Lending Club since, in the event of a borrower's default, Patch of Land can usually foreclose on the underlying property, sell, and recoup the investor/lender's investment including due interest (assuming a low enough LTV.)[7]

As one of the earliest real estate crowdfunding platforms,[2] Patch of Land is considered by those in the real estate investment industry to have established many of the practices which are now common in real-estate crowdfunding. For example, Patch of Land was the first real estate crowdfunding platform to focus exclusively on real-estate loans[8] as opposed to equity, or both debt and equity simultaneously.[8]

Also, Patch of Land was the first to pre-fund the loans it offered,[9][10][8] providing immediate accrual of interest and giving borrowers access to all borrowed funds immediately without needing to wait for investors to sign on.

Patch of Land was also one of the first to co-invest in its property loans alongside the investors on its platform,[11] aligning their mutual interests.

In the summer of 2015,[12] Patch of Land announced its Indentured Trustee Investment Model,[13] offering a bankruptcy-remote investment structure and stronger consumer protections for its investors. Patch of Land opened its Indentured Trustee Model documentation to the public in the hopes that other firms would follow suit, as many did.[14][15][16]

In May 2015, Patch of Land completed the largest ever real-estate investment loan offering of $1,900,000 to be fully crowdfunded (via regulation 506c ) as of that date.[17]

In 2015, CNBC created its Crowdfunding Index (powered by Crowdnetic) and included Patch of Land in both the real estate sub-sector as well as the overarching crowdfinancing sector[18]

In 2016, Entrepreneur Magazine named Patch of Land to its list of 100 Brilliant Companies[19]

Regulations

Due to current investor protections written into US FINRA and SEC Regulations - specifically rule 506 of SEC Regulation D, SEC Regulation A, and The JOBS Act - real-estate crowdfunding (such as it's offered via Patch of Land) is not yet openly or easily available to retail investors.[1][20] As such, Patch of Land is only available to Investors/Lenders who are considered accredited investors by US regulatory bodies.

There are currently no regulatory restrictions on who can qualify to borrow via Patch of Land.

Funding & Investment

Patch of Land's first major outside investment came in 2014 from Smart Street Ventures, a subsidiary of Tactical Group Holdings. Thereafter, Patch of Land became the first real estate crowdfunding firm to crowdfund itself[21][8] via the Seedinvest equity fund-raising platform.

Patch of Land subsequently raised a record (for real-estate crowdfunding companies at the time) $23.6 million in institutional financing[22][23] led by SF Capital of New York, as well as an investment from Ron Suber, president of Prosper.com marketplace.

In Feb 2016, Patch of Land announced that it had secured $250 million in investments through its platform from a large east-coast credit fund[24][25] via a forward flow arrangement.

As of Q4 2017, Patch of Land had originated 986 crowdfunded real estate loans[26] totaling approx. $490,000,000 at an average realized rate of return of approx. 10.9 %.[26]

See also

References, Citations

  1. 1 2 3 http://repository.upenn.edu/cgi/viewcontent.cgi?article=1006&context=joseph_wharton_scholars. Missing or empty |title= (help)
  2. 1 2 "Patch of Land Raises $23.6 Million in Financing, Led by SF Capital Group and Ron Suber". www.businesswire.com (Press release). Retrieved 2017-03-30.
  3. ↑ equities.com. "Crowdfunding Comes to Real Estate: Interview with Patch of Land CEO Jason Fritton". Equities.com. Retrieved 2017-03-30.
  4. ↑ "Peer-to-Peer Real Estate Crowdfunding Explained with AdaPia D'Errico from Patch of Land". Real Estate Radio Show. 2015-04-20. Retrieved 2017-09-08.
  5. ↑ "The Real Estate Crowdfunding Review". The Real Estate Crowdfunding Review. Retrieved 2017-09-08.
  6. ↑ "Change at the Top: Paul Deitch of Oaktree Capital Steps in as CEO of Patch of Land". Crowdfund Insider. 2016-04-25. Retrieved 2017-03-31.
  7. ↑ "A Beginner's Guide to Real Estate Crowdfunding". Landlordology. 2016-03-18. Retrieved 2017-09-07.
  8. 1 2 3 4 "Real Estate Crowdfunding Trailblazer, Patch of Land, Reflects on Many "Firsts"". Crowdfund Insider. 2015-01-12. Retrieved 2017-04-17.
  9. ↑ "How Does Patch of Land Work?". Crowdfunding Success Tips. 2015-11-23. Retrieved 2017-04-17.
  10. ↑ Stoller, Bill (1969-12-31). "LendingClub (NYSE:LC) - Exclusive: Patch Of Land Fintech Sprouts Growth Through Real Estate Crowdfunding". Benzinga. Retrieved 2017-03-30.
  11. ↑ "A Quarter Billion Institutional Credit Will Not Deter Patch of Land's Commitment to the Crowd". Crowdfund Insider. 2016-02-17. Retrieved 2017-03-30.
  12. ↑ "Patch of Land Announces All Existing and Future Loans Secured by Underlying Collateral as Part of New Loan Structure Offering". pol.newswire.com (Press release). Retrieved 2017-03-30.
  13. ↑ "The Real Estate Crowdfunding Review". The Real Estate Crowdfunding Review. Retrieved 2017-03-30.
  14. ↑ "New Offering Structure for Debt Investments | RealtyShares Blog". blog.realtyshares.com. Retrieved 2017-09-07.
  15. ↑ "Patch Of Land Now Offers a Truly "Secured" Investment Structure". Crowdfund Insider. 2015-06-11. Retrieved 2017-09-07.
  16. ↑ "Adding Real Estate Crowdfunding to Your Investment Portfolio". Real Estate Investors Blog | Sharestates, LLC. 2016-08-01. Retrieved 2017-09-07.
  17. ↑ "Patch of Land Makes History By Closing Largest Residential 506c Crowdfunded Loan to Date". Crowdfund Insider. 2015-05-28. Retrieved 2017-03-30.
  18. ↑ staff, CNBC com (2015-02-04). "The CNBC Crowdfinance Real Estate Average". CNBC. Retrieved 2017-03-30.
  19. ↑ Shoot, Brittany (2015-05-26). "Let This Company Make Your Concept a Creation". Entrepreneur. Retrieved 2017-04-17.
  20. ↑ "SEC.gov | SEC Adopts Rules to Permit Crowdfunding". www.sec.gov. Retrieved 2017-11-15.
  21. ↑ "Patch of Land Announces Public Fundraising on SeedInvest: CEOs Jason Fritton and Ryan Feit Comment". Crowdfund Insider. 2014-10-16. Retrieved 2017-03-31.
  22. ↑ Street, All rights reserved © 2017 The Real Deal is a registered Trademark of Korangy Publishing Inc 450 West 31st; York, New; 212-260-1332, NY 10001 Phone: (2015-04-08). "Patch of Land Funding | Real Estate Crowdfunding". The Real Deal New York. Retrieved 2017-04-11.
  23. ↑ "Patch of Land Raises $23.6 Million for Real Estate Platform. SF Capital & Ron Suber Lead Round". Crowdfund Insider. 2015-04-08. Retrieved 2017-03-30.
  24. ↑ "Patch of Land Secures $250 Million from an East Coast Credit Fund | Payment Week". Payment Week. 2016-02-19. Retrieved 2017-04-06.
  25. ↑ "East Coast Credit Fund Puts $250 Million to Work on Patch of Land Platform - Finovate". Finovate. 2016-02-12. Retrieved 2017-04-06.
  26. 1 2 "Patch of Land P2RE Statistics and Trends". patchofland.com. Retrieved 2017-04-11.
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