As part of our broader strategy of financing the construction of new homes in cities experiencing a housing shortage, we’ve invested $9.9 million in the acquisition of 16.5 acres of land in Daly City, CA, the southern border of San Francisco.
Business plan
The borrower, Point Martin, aims to finalize the entitlements to build 133 single-family homes on the lot, a process we expect to take around 2 years to complete. Upon securing entitlements, they intend to sell the property to a home builder. Our goal is to earn consistent cash flow from interest payments through the expected maturity date in May of 2020.
Why we invested
- Excellent location: Located just eight miles south of downtown San Fransisco, the property is within close proximity of two BART transit stations and two regional freeways providing easy access to the city.
- Robust housing market: Rising wages combined with a shortage of new homes in the Bay Area have made San Francisco notorious as one of the least-affordable housing markets in the country. In February of 2018, Realtor.com reported that the average home in San Francisco sold in 21 days, roughly a quarter the national average of 83 days. We expect a continued strong market for single-family homes.
- Attractive margin of safety: Our loan is equal to roughly 27.4% of the total value of property, based on a May 2018 appraisal. This serves as a cushion for potential loss, as the value of the property would have to fall drastically for us to lose money.
