CP95: (POP) New Silver NS3

[prankstr25]

Section 1: Partnership

Value Proposition/Investment Thesis:

New Silver NS2 was one of the first and longest-running pools on Tinlake, having securitized over 50mm DAI on-chain. New Silver is looking forward to the continued partnership with the Centrifuge community. NS Pool 3 will offer prospective investors the opportunity to gain on-chain exposure to real estate backed loans originated directly by New Silver Lending LLC. The Centrifuge App will allow New Silver to efficiently lower its cost of capital and provide enhanced returns compared to similar off-chain investments.

Company Info:
New Silver Lending LLC
Location and Team Size:
Corporate Offices: 2475 Albany Ave, Suite 203-B, West Hartford, CT USA
Total Employees: 18

Founding Team, Experience, and History:

Kirill Bensonoff - Co-founder and CEO. Kirill is a technologist and a serial entrepreneur, having built and sold successful companies in the enterprise IT space prior to New Silver. Kirill is responsible for overseeing the business direction and technology development.

Alex Shvayetsky - Co-founder and Chief Risk Officer. Alex’s career spans over 25 years in commercial real estate management and operations. Alex is responsible for overseeing risk and lending practices.

Alexey Shevchenko - CTO. Alexey holds a master’s degree in computer science and has been building software for over a decade. Alexey oversees the company’s software engineering efforts.

Landon Mizuguchi – CFO. Landon advises the team on planning, analysis, and related matters. Landon’s career has encompassed experience with firms such as PayPal (Strategic Finance), Goldman Sachs (Investment Banking) & EY (Transaction Advisory).

James Keegan - Loan Advisor Team Lead. James is an experienced banker, having previously been a commercial lender at DR Bank and at People’s United Bank. James oversees the loan advisory team.

John Coury - Head of Capital Markets. John has 15+ years of experience in real estate capital markets, having spent his career in private equity houses such as Axiom Capital. John is responsible for helping the company raise capital.

Lifetime Originations:

AUM as of July, 2023:

$53mm

What does your company do?

New Silver is a non-bank, direct lender primarily focused on providing short-term business purpose loans collateralized by residential real estate in the United States with an emphasis on the “fix and flip” sector. Fix and flip loans allow real estate investors to finance both the purchase and the renovation, or in some cases, refinance an existing investment property with sufficient equity from the borrower.

What makes your approach unique within your industry?

New Silver has developed proprietary loan origination and automated underwriting software that enables fast, API-driven loan decisioning and pricing. Through our innovative online platform, borrowers can apply for a loan online and instantly download a proof of funds letter and conditional term sheet. This is highly unique in the lending industry and allows for a user-friendly experience for the borrower.

How do you differentiate yourself from competitors?

1. Speed of Execution - Our online technology platform allows for near-instant, streamlined application and approval process for borrowers. In addition, borrowers can manage their loan lifecycle through an online portal and request construction draw reimbursements on a frequent basis.

2. Convenience - Get everything in one place, online. New Silver allows borrowers to apply, get approved, download term sheets, buy insurance and more all within minutes. Post-close management is also simple.

3. Loan Pricing - because of our technology, we need less manpower to scale, and can pass on those cost savings to clients.

Company Financing:

Equity raised:

None except founder’s contributions

Debt funding:

New Silver Lending LLC does not utilize debt funding at the operating company level. The company manages its own balance sheet to fund all loans, and afterwards, loans are sold to “permanent” warehousing.

Revenue model:

1. Origination Fees. New Silver’s main source of revenue is generated through origination fees that are paid by the borrower at closing. This ranges from 2-3% of the loan amount.

2. Yield Spread. New Silver may retain interest in the loan through a yield spread, which for NS3 is projected to be at 1%. This is calculated on the spread between the weighted average cost of capital and the lending rate on the loan.

3. Fees. New Silver may charge various closing fees to the borrower, which range between $750 and $2000 per loan.

Professional Partners:
Loan Servicer: FCI Servicing, Inc.
Asset Manager: New Silver Lending, LLC
Accounting: Why Blue, LLC
Legal: Polsinelli, PC

Section 2: Credit Experience

Capital Markets:
New Silver maintains extensive relationships globally with family offices, high net worth individuals, alternative investment firms and hedge funds. Many of our relationships are familiar with NS Pool 2 and our credit facility with Maker. Now that the legal structure and investor economics have improved, we believe there is increased appetite for on-chain investing in NS Pool 3.

Originations
From July 2021 through June 2023, New Silver originated 360 loans with an aggregate loan volume of $120mm. New Silver consistently originates around $5-8mm per month.

$ Volume of Transactions Completed Last 12 months:

$49,500,575

$ Volume of Origination Pipeline YTD:

$500mm+

Historical Loan Tape (years):

2019 - $24,835,032
2020 - $11,617,282
2021 - $49,232,870
2022 - $66,851,419
2023- $22,122,820 (through June)

Detailed data available to underwriting

Forecast
New Silver has the ability to scale originations to $10-15mm per month. Our technology platform allows us to scale efficiently by minimizing the need to hire significant support staff.

Section 3: Crypto Experience

Over the last 12 months, we have engaged with 7 off-chain debt capital partners with term sheets ranging from $25-150mm in size. All of these are tradfi investors and lenders ranging from multinational banks, regional banks, institutional asset management firms and credit funds that expressed interest in providing New Silver with off-chain credit facilities. These groups will not participate on the Centrifuge App.

Additionally, we sourced a $20mm term sheet from an alternative credit fund to provide Junior capital in our pool on-chain. We cultivated this relationship over the last 12 months, and they are committed to moving forward when we are ready.

Why is DeFi important to your strategy?
The viability of any lending company relies on access to reliable capital and liquidity. We believe DeFi can play a crucial role for capital markets diversification as fractional-reserve banking and off-chain capital markets continue to show flaws in the current environment.

Section 4: Pool

Pool TVL at Launch:

2mm USDC

Pool TVL at 1 Year:

20mm USDC

Structure

What is the intended structure of the Pool?

The Issuer will issue two tranches of tokens: NS3 Senior (NS3SR) Tokens and NS3 Junior (NS3JR) Tokens. The NS3SR Token will be a senior token that generates a fixed rate of return when deployed in financings. We will work closely with the Centrifuge Credit Group to determine an appropriate fixed APY for NS3SR tranche. The NS3JR Token will be a subordinated token that will be subject to the first losses up to their full value, thereby acting as a buffer against losses to investors in the NS3SR Tokens. The Junior Risk Buffer of NS3JR to NS3SR will be a minimum of 20%. The Junior Risk Buffer (“First Loss % / NS3JR Ratio %”) is the current market value of the Junior Tranche in relation to the total pool value (Junior Tranche market value divided by Total Pool Value). The minimum junior risk buffer indicates the lower limit and ensures that senior investors in NS3SR are protected by a certain amount of NS3JR invested in the pool at any time.

Capital partners

New Silver will fund the initial pool out of balance sheet capital as well as capital from the New Silver Income Fund. This fund is an off-chain, open-ended offering that provides an investment vehicle for accredited investors to participate in New Silver’s on-chain pools.

Our current investor base is mostly high net worth accredited investors and family offices. We maintain relationships with institutional investors who expressed interest in our on-chain pool. However, these groups have a minimum Junior check size ranging from $25-50mm. Without significant Senior capital, these investors will not be able to participate in our pool to achieve their leveraged return hurdles. Over a period of time, our goal is to scale our pool on the Centrifuge App to a size that allows for institutional participation in the Junior tranche. We believe that a larger investment opportunity combined with a deeper track record on-chain will allow us to tap into our institutional relationships.

Please indicate by tranche where partners will participate

NS3JR

What percentage of this Pool will be financed via on-chain versus off-chain capital partners?

We intend to fund the Junior tranche (20%) with off-chain capital and will look to on-chain capital partners to fund the Senior tranche (80%).

Asset Type(s):

Business purpose residential real estate loans secured by first liens on the subject property

Average Ticket Size:

$300,000

Average Asset Maturity:

Our loans average 18 months (initial term plus extensions). However, New Silver may sell the loans prior to maturity, using the pool similar to a warehouse facility.

Expect Default Rate:

The industry average is approximately 1-2%, but our existing NS2 Tinlake pool is at 0%. Since 2019, New Silver has maintained an above-average track record with no losses of principal on its’ loans. We manage risk with an emphasis on loan surveillance and loss mitigation to prevent defaults. Every loan is continuously monitored for any indication that the borrower is at high risk of default. Prior to origination, a full underwriting review is performed on the borrower’s credit, liquidity, and experience to ensure they have sufficient resources and knowledge to successfully complete the project in a timely manner. These proactive strategies directly impact our default rate.

Additionally, the overall risk profile may be reduced by utilizing NS Pool 3 as a short-term warehousing facility.

Expected borrowing rate on senior tranche (on-chain):

TBD - this will be determined with assistance from the Centrifuge Credit Group.

Expected lending rate to end borrower (off-chain):

10-11%

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Update 2024-03-21

This proposal, CP95: POPNew Silver NS3, has been submitted to the Proposal Repository on GitHub so it is now final.

• Link to the proposal on GitHub: cps/cps/CP95/CP95.md at main · centrifuge/cps · GitHub

[Will_Coleman]

This is awesome to see, I am excited for this pool! As a fellow private real estate lender I can attest that we are also seeing a low default rates on our loans.

Since banks and other lending sources are pulling back we are seeing an increase in loan volume and actually seeing high quality borrowers use our lending options rather than banks.

I say this mainly to point out that while liquidity gets drained out of the banks and the traditional financial system due to rates this will cause more demand for private lenders such as New Silver which actually allows private lenders to choose from higher quality borrowers.

I think now is a great time for Centrifuge to be an industry leader in financing private credit for real estate

[ctcunning]

The name speaks for itself…3 years of performance onchain, specifically on Centrifuge, and an impending growth opportunity on NS2 with MakerDAO.

I think it’s worth noting here that sizing is small at 2M launch…I do think the Credit Group participation in this POP process will be essential to help us understand this and provide a solid template for future POPs cc @mark_hergen. I wonder which CG contributors will be most helpful and insight on this.

Further, I think the technical component of CentChain, and perhaps being the first new Issuer launched on that chain, could be an interesting evaluation / learning process through this.

Either way, the POP is live, governance begins, and the community can begin to go on this journey.

Excited to see what we learn along the way.

[mark_hergen]

@prankstr25 Thanks for this write up and for the detail. The credit group will be in touch shortly to schedule a brief phone call to help answer any outstanding questions that senior lenders may have regarding the credit. Looking forward to another successful pool launch!

[ctcunning]

Our loans average 18 months (initial term plus extensions). However, New Silver may sell the loans prior to maturity, using the pool similar to a warehouse facility.

@prankstr25 – what’s the redemption period / lock up period going to look like on this?

If potential investors were to allocate, what’s min/max they should expect for when they can redeem their position?

[prankstr25]

This may partially depend upon the legal requirements under Reg D and if there is a minimum lockup there. Aside from that, with potential turnover of loans in this pool, and depending on the amoint of a potential redemption, it could be available immediately, or take up to 60 days to satisfy. We can work on getting a more exact number, as well as guidenance from legal.

[ImdioR]

Good day @prankstr25
Will be the Junior investment available for public investors?
What will be the min. investment amount for the Junior tranche?

[prankstr25]

Yes, it will be open to accredited investors. Minimum investment will be 5,000 USDC.

[ImdioR]

5,000 for Junior investment too?

[prankstr25]

Yes, the minimum investment into Junior will be 5k USDC

[yieldkollector]

POP Review Report

Report Author: Cynthia Zhang, Member of the Centrifuge Credit Group

OVERVIEW
New Silver Pool 3 (“NS3”) represents an opportunity to prospective investors to gain on-chain exposure to real estate backed loans originated directly by New Silver Lending LLC and/or its subsidiaries. The income generated from the NS3 is largely driven by the performance and liquidity of the pool’s underlying assets. The Pool Onboarding Proposal [POP] can be found here from the public Centrifuge forum.

Strengths & Weaknesses

Strengths:
• New Silver utilizes a few different risk management and mitigation strategies when selecting and managing new counterparties and pool assets.

• New Silver intends to fully fund the Junior tranche (NS3JR), which represents 20% of the total offering, aligning incentives and creating a buffer for senior lenders in case of asset write-downs. The remaining Senior tranche, accounting for 80% of the total offering, will be fully funded on-chain. Furthermore, the issuer has the option and willingness to buy ‘noisy’ assets out of the pool at par to support its overall performance. This can further enhance the credit enhancement beyond that implied purely by the subordinate tranche.

• Experienced issuer with a track record of low default rate, which is evidenced by the default rate of 0.0% of the existing NS2 Tinlake pool. The industry average is approximately 1-2%. Since 2019, New Silver has maintained an above-average track record with no losses of principal on its’ loans.

• Creation of the Trust. Governed by a Pooling and Servicing Agreement, this primary agreement governs the trust after the pool is funded/closed. Ankura Trust Company serves as the indenture trustee, with its primary duty being to safeguard the interests of investors who purchase the securities issued pursuant to the securitization. The nature of the trustee’s duties is specifically set forth in the Indenture. For instance, if an Event of Default of which a Responsible Officer of the Indenture Trustee has actual knowledge or has received written notice has occurred and is continuing, the Indenture Trustee shall exercise the rights and powers vested in it by the Indenture and use the same degree of care and skill in its exercise as a prudent Person would exercise or use under the circumstances in the conduct of such Person’s own affairs; provided that such standard shall not be deemed to require the Indenture Trustee to take any action if the terms of this Indenture provide that the Indenture Trustee acts at the direction of another Person, including any Tokenholder, and such Person has not provided such direction.

• The proposed pool may be used as a short-term warehouse financing facility, even though New Silver intends to hold loans in the pool until maturity. Warehouse lending is a low-risk and efficient line of business due to its nature, such as being short-term, collateralized, diversified, strong risk management, and liquid market.

Weaknesses:
• Credit risk: The primary risk is borrowers defaulting on their mortgage. How much of the loan will investors receive back once the property is foreclosed upon and sold. This risk is mitigated by the experienced team and the reported low default rate of NS2 Tinlake pool.

• Interest rate risk: This risk is mitigated by relatively short loan terms.

• Reinvestment risk: This risk is mitigated by current high interest rates environment, which is expected to remain higher for longer.
(Interest rates - Short-term interest rates forecast - OECD Data).

• Relatively high LTC: This risk is mitigated by debt service escrow and the satisfactory net worth and liquidity of the borrower. Furthermore, the issuer has the option and willingness to buy ‘noisy’ assets out of the pool at par to support its overall performance.

OPPORTUNITY DETAILS

Fix and Flip Loans Overview
Proceeds of this offering will be used to finance commercial purpose, fix and flip loans (also referred to as bridge or ground up loans, collectively, the “Underlying Assets”). Fix and flip loans allow real estate investors to finance both the purchase and the construction, or in some cases, refinance an existing investment property with sufficient equity. When a borrower submits a loan request via New Silver’s online platform, New Silver makes use of its proprietary technology and data to underwrite the loan in real time, and offers the borrower conditional approval, terms and rates on its web platform. Upon final approval, a real estate closing with a partner attorney or settlement agent is initiated. The closing company reviews the title and puts together the closing package as required by state regulations. The loan is always in a first lien position,. In most cases, the total loan amount is split into an upfront purchase and a construction reserve. The purchase amount is used to finance the purchase of the property and is advanced at the closing. The construction reserve is held in escrow by the Asset Manager and is used to reimburse the construction costs. At loan maturity or loan refinance, the loan is paid off in full (principal and any outstanding interest).

Underlying Asset
• A review of the historical loan tape for the Tinlake pool was conducted.
New Silver was the first and is one of the largest real world (RWA) vaults on Maker DAO, having securitized over 90mm DAI in aggregate volume with senior backing from MakerDAO. New Silver has over 1.5 years of history with the MakerDAO with no defaults. Over the past three years, NS has originated over 400 loans, totaling $120.93MM. A total of 264 loans, with a combined loan amount of $83.82MM, have been paid off, accounting for approximately 50% of the total unpaid balance.

• The issuer aims to adhere to the following criteria for the underlying asset.

Key Transaction Parties

• Asset Originator/Issuer: New Silver Lending LLC (“New Silver”)

• Founded in 2018, New Silver is a technology enabled non-bank lender primarily focused on providing commercial purpose, real estate-backed financing for the United States “fix and flip” sector with a concentration on single-family residential assets. New Silver was the first, and is one of the largest real world (RWA) vaults on Maker DAO, having securitized over 90mm DAI in aggregate volume with senior backing from MakerDAO. New Silver has over 1.5 years of history with the MakerDAO with no defaults. To date, the company originated over $175mm loans. The company currently manages ~$50mm in its active loan portfolio. (https://newsilver.com)

• Key team members
  o Kirill Bensonoff - Co-founder and CEO. Kirill is a technologist and a serial entrepreneur, having built and sold successful companies in the enterprise IT space prior to New Silver. Kirill is responsible for overseeing the business direction and technology development.
  o Alex Shvayetsky - Co-founder and Chief Risk Officer. Alex’s career spans over 25 years in commercial real estate management and operations. Alex is responsible for overseeing risk and lending practices.
  o Alexey Shevchenko - CTO. Alexey holds a master’s degree in computer science and has been building software for over a decade. Alexey oversees the company’s software engineering efforts.
  o Landon Mizuguchi – CFO. Landon advises the team on planning, analysis, and related matters. Landon’s career has encompassed experience with firms such as PayPal (Strategic Finance), Goldman Sachs (Investment Banking) & EY (Transaction Advisory).
  o John Coury - Head of Capital Markets. John has over 15 years of experience in real estate capital markets and investment banking, having spent his career in private equity houses such as Axiom Capital. John is responsible for helping the company raise capital.

• Loan Servicer: FCI Servicing, Inc., a California corporation
• Seller/Issuer Accounting: Why Blue, LLC
• Seller/Issuer Legal: Polsinelli, PC
• Custodian: N/A
• Indenture Trustee: Ankura Trust Company, LLC, a New Hampshire limited liability company and chartered non-depository trust company
• Broker: Circle
• Exchange Agent: New Silver Lending LLC, a Delaware limited liability company
• Bank: Needham Bank
• Centrifuge Protocol
• Centrifuge provides infrastructure that facilitates the decentralized financing of real-world assets natively on-chain, creating a transparent market which allows borrowers and lenders to transact without intermediaries. Asset pools on Centrifuge are fully collateralized and liquidity providers have legal recourse. Pools for assets on the protocol include mortgages, invoices, microlending and consumer finance. Centrifuge Protocol utilizes smart contracts, epochs and various systems and software to manage the investment and redemption process. For more information and technical details about Centrifuge, see here.

Transaction/ Flow of Funds

Ankura Trust will take actions as directed by a representative of the tokenholders on terms set forth in the Indenture. Below are three flowcharts illustrating the flow of funds, representing on-chain/off-chain transactions, the normal scenario, and the default scenario.

Structure

• Legal analysis was not conducted on investor subscription agreements as their final form may change prior to pool launch.

• A draft of the Indenture was provided and has been reviewed. As the final document is still in progress, no conclusion has been drawn yet.

• Consideration should be taken to the key investor protections and remedies – which may positively or negatively impact the ability to service debt obligations - including but not limited to:

• Performance-based maintenance covenants.
• Payment-based events of default and their respective triggers, cure periods and remedies.
• Termination provisions either initiated by borrower or lender.

FINANCIAL ANALYSIS

• Financial analysis of the Issuer/Asset Originator was conducted. The net worth and liquidity are satisfactory.

• The financial health of the issuer and its ability to access capital markets may impact the ability to service debt obligations, either positively or negatively.

Disclaimer: This report is for informational purposes only, is not an offer, solicitation, recommendation, or commitment for any transaction or to buy or sell any security or other financial product named or described in this report, and is not intended as equity research, investment advice or as a confirmation of any transaction. Interested parties are advised to contact the entity with which they deal, should they desire further information. Any market price, indicative value, or yield, estimate, view, opinion, data, or other information herein is not warranted as to completeness or accuracy, is subject to change without notice, and Centrifuge DAO Credit Group accepts no liability for its use or to update or keep it current.

[ImdioR]

Good day Community.

This proposal, CP95: POPNew Silver NS3, has been submitted to the Proposal Repository on GitHub so it is now final.

• Link to the proposal on GitHub: cps/cps/CP95/CP95.md at main · centrifuge/cps · GitHub

The proposal was tabled now and will move to an On-chain voting on 24th of March (#5,140,800):

Please vote here:

• Democracy Proposal 5 will be open for 50,400 blocks approximately 7 days (until 31/03/2024) and will be executed on 08/03/2024.

Do you agree with onboarding POPNew Silver NS3?

Please vote Yes or No.

[Rhano]

Democracy Proposal 5 has become Referendum 51 but it will fail to execute even if the referendum passes.

This proposal will be resubmitted onchain as a council motion motion instead that, if passed in the council, will become Referendum 52 for all CFG token holders to vote on. The vote will be open for 50,400 blocks (~7 days) and will be fast-tracked.

This post will be updated as soon as the council motion is live.

cc. @prankstr25

[ImdioR]

Good day
Some context about why this referendum will fail:

About the expected failure

• Subscan | Aggregate Substrate ecological network high-precision Web3 explorer

Unfortunately, the referendum was proposed to execute the Inline of the above preimage. However, Inline expects a call and not a preimage.

There are three variants to define a proposal on chain: Inline , Legacy and Lookup . The former expects the exact call and thus does not require the registration of a preimage beforehand. The latter two expect a preimage hash.

Best.

[Rhano]

Council Motion 86 has passed and is now Referendum 52 for all CFG token holders to vote on.

The referendum is open for 50,400 blocks (~7 days). This referendum is fast-track so if passed, it will be enacted immediately after the referendum vote ends.

Vote in the portal: CP95: (POP) New Silver NS3

Vote on SubSquare: CP95: (POP) New Silver NS3

Please cast your vote on whether to launch the NS3 pool on Centrifuge.

[ImdioR]

Good day @prankstr25
Can you please share here the slides of your presentation?
Thank you

[ImdioR]

Pool Party #8 with New Silver

[ImdioR]

Good day Community

The referendum has passed with the following results: