POP: UrbanGate Capital
Business Name: UrbanGate Capital - Here is our website (https://www.urbangatecapital.com/)
Current AUM: $6,242,200
$ Volume of Transactions Completed Last 12 months: $18,124,167
Target Launch Date: January 2023
Location and Team Size: Nashville, TN. Team size = 5
Years in Operation: 2.5 years
- If less than 2 years in operation, number of years founding team has worked together:
Historical Loan Tape (years): 3 Years
Key Professional Partners (legal, accounting, operational, technical, structuring):
Describe your business and go to market strategy. We are a Private Lender (AKA a Hard Money Lender) for Fix N Flips in Nashville TN. We raise capital from investors and lend it to borrowers who are flipping houses. Are loans are typically 6 months and we charge about 12% interest and 2-3 origination fees.
- What makes your approach unique within your industry? Most real estate lenders are banks or large institutions and they have a bunch of red tape in order to approve a loan. We are private lenders that lend on commercial assets therefore since we are not a depository institution and we don’t lend on residential mortgages we can move significantly faster than most lenders. We can close a loan in 3-5 days if needed.
- Why are you a good partner for Centrifuge? The purpose for our company is to connect DeFi to Real Estate and we believe Centrifuge has similar ethos and goals of connecting DeFi to RWAs. We are a young company that believes that crypto is the future of money and that the future of capital markets will be on the blockchain. Our loans provide high yields (8-10%) on first lien loans collateralized by real estate.
- How do you differentiate yourself from competitors? Mostly through speed and convenience. Because we only lend in Nashville at the moment and we have significantly less red tape to fund loans we can move much faster than our competition. In addition we are experts in the Nashville market, as founders we have 15+ years of real estate investing experience therefore we have a strong network and market experience.
How is your entity financed today, what are the current sources of capital:
- Equity raised: We operate a Fund which we have just launched in July 2022 and we raise capital outside of the Fund if needed with individual investors.
- Debt raised: We have not raised any debt.
What is your entity’s revenue/fee model:
- Origination fees: 2-3%
- Target spread: 7-11%
- Other: N/A
- Please explain the source(s) of, and ability to scale, your first-loss junior (TIN) capital in the pool: Since most of our current capital network is traditional real estate and fixed income investors I think the lower risk senior tranche will be of more interest to our network so we would plan to build a network in the DeFi community to source most of our capital for this tranche.
- Please explain the source(s) of, and ability to scale, your senior (DROP) capital in the pool: We have successfully raised $10MM+ from traditional investors (wealthy individuals) and while I do think it would be difficult to pull a lot of these investors into the crypto ecosystem due to their lack of understanding I think we could raise around $500k to $2MM from this network. I do think this network would mostly have an interest in the senior tranche as most real estate investors are lower risk.
- Capital relationships and how much you will bring through Centrifuge KYC to invest in either senior or junior tranche of your pool: We are talking with our investors about this now. As mentioned above most of our investors are old school type wealthy individuals so I don’t have a specific $$ amount however I would estimate approx. $500k - $2MM at first and grow this over time as we earn trust.
- Outline why DeFi is important to your business strategy: The driving purpose for our business is to connect DeFi to Real Estate Lending. We started our business with this goal in mind. We believe that Crypto, Decentralized money, and decentralized finance is the future because it is a more transparent, fair, and predictable ecosystem. We believe sourcing capital from the future of capital markets will allow us to be better set up for the future as these capital markets grow.
- Articulate why Centrifuge’s community and protocol is a fit for financing: We have connected with a handful of protocols that we thought would be a good fit and after researching the competition we believe Centrifuge has the better technology for what we are looking for as well as ethos.
Structure: Risk & Terms
Please explain the key risks inherent in this opportunity and asset class:
- We are a first lien position lender on Real Estate in Nashville, TN. The main risk is that there is a major housing market crash in Nashville which causes our borrower to default on our loans. The good news is in this event we are a first lien lender therefore we would foreclose on the real estate and could hold them as rentals until the housing market recovers.
Pool Size & Pipeline:
- At Launch: $500k - $2MM
- 6 Months after Launch: $5MM
- 12 Months after Launch: $10MM
- Origination Pipeline Details: Today through our debt fund we are doing about $3-$5MM a quarter in loan originations.
Asset & Rates:
- Asset Type(s): Real Estate in Nashville, TN mostly single family houses, land, commercial properties, and multi family properties.
- Average Ticket Size: $250,000
- Average Asset Maturity: 101 days
- Expect Default Rate: Year to Date we have had 0 defaults however I know that won’t last forever so I would say 1-3%.
- Expected borrowing rate on senior tranche (on-chain): 4-6%
Expected lending rate to end borrower (off-chain): 12%