[Issuer] UrbanGate November 2023 Update & Thoughts on the Housing Market

Hello Centrifuge Community,

Not much has changed since my last post about the housing market. We are seeing a continual trend of mortgage rates staying within the 7-8% range, the demand for housing is low due to the lack of affordability, and housing inventory as a long term trend is increasing. In addition, mortgage delinquencies are still low so I don’t think there will be a flood of foreclosures hitting the market.

What I do love about housing is that it is simple Supply and Demand. Right now we are in a market where supply is slowly growing and demand is slowly falling. This leads me to the conclusion that prices will slowly fall as long as this supply and demand trend continues. I do tend to be a pessimist but I am operating under the mental model that we will see a 5-20% decline in housing values over the next 12-24 months. However, I have been wrong many times before and I could also very easily see a scenario where housing values stay strong and only decline 1-5% from this point on. Obviously a lot of it depends on what happens with interest rates but as an asset allocator I am making sure our loan portfolio is prepared for a 5-20% slow decline in value over the next 12-24 months and I think there is a good chance I am pleasantly surprised.

While we are not yet operating a pool on Centrifuge, we like to post our monthly updates that we send to our investors here in the Centrifuge Forum so that everyone can keep up with our loan progress in hopes that we can successfully launch a pool on Centrifuge in the future.

Here is a link to our UrbanGate Monthly Investor Video Update

Here is our October 2023 Key Metrics:

  • Capital in the Fund: $2,925,311
  • Utilization rate: 99%
  • Loan Volume: $960,000
  • Number of Loans: 7
  • Loan to Value at Origination: 78%
  • Loan to After Repair Value: 68%
  • Loan to Cost: 92%
  • Interest Paid to Investors: $37,817.81

Good day Will!
Thanks for the regular updates.
Just out my curiosity, do you have a plan for when UC can reach 5-10M in Loan Volume?

Right now we are doing about $12-$15MM a year in loan volume. I would estimate that we would do $15-$20MM in 2024.

The biggest challenge for us is that we don’t have many partners for on chain capital. We have talked with Maker and they said we would need to be able to do a $20MM line minimum for it to be worth it for them. And since our loans are an average of 6 months a $20MM line of credit would mean that we would need to be doing $40MM in loan volume. Right now we could deploy a $8-10MM line of credit from an on chain liquidity provider but we haven’t yet built those relationships.

Do you know any potential on chain investors that would be interested?


Thanks Will. A nice overview. In the video, you mentioned an email. Could you also send a link to it in future? When I understood it correctly, the Investors’ return is at 6.8%? Regarding LTC, what’s your ideal ratio for your type of business? I try to get my head around your average loan of 6 months and your yearly volume of 12m to 15m a year. How does this add up if you only have a fund of 3m atm?

Hey Pathrock,

I am not sure if I know how to link to an email. We send out a an email to our investors each month via active campaign. If you or anyone else would like to be added to our investor list please let me know and provide me with your email and I will add you to the list. If you know how to link to an email I can do that in future posts but I am not sure how to do that to be honest.

And no we pay our investors an 8-10% annualized yield through monthly distributions. The 6.8% debt yield is a separate metric that we track. The debt yield basically identifies if we had to foreclose on our loan and rent the property out. What yield would we earn from the cash flow of the rental property.

for the LTC we like to be at 85% or less. Right now we are a little bit higher so we are working to bring or loan to cost down on future loans.

for the loan volume question, we close loans through our fund which has a bout $3MM in it currently and then we also fund loans outside of the fund through individual investors. So if our fund is fully deployed which it is currently we can source capital from one investor that would fund one loan by themselves. We have access to about 5-7MM through capital partners outside of the fund. Some investors prefer the Fund and some prefer funding deals individual and we are able to acomodate both investor types.

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Thanks for your explanation! You showed already good information here in the forum; I just mentioned it as you said it in the video presentation. In case you think there’s more to see in the mail, by all means add me into that one as well (info@oceanblock.co). Keep up your great work!

Thank you for the questions! I have added you to the list :sunglasses:

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Good day Will!
Sorry for the delay with the answer.
Thank you for clarifying the details about the Loan in Volume!

Unfortunately, i don`t.

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