A closed Caldrion loan, shown under its project code name. The borrower and sponsor are not named. Terms are as of closing; returns are our underwriting targets, not realized results.
Lender finance · $40.0M · 65% advance (about 40% look-through) · S+600
At a glance
| Borrower | A non-bank lender making short-term first-lien loans of $500K–$5M on small multifamily, mixed-use and single-family rental portfolios in FL, TX, GA, NC, TN and AZ. A 9-year history, a $165M loan book and 0.6% cumulative realized losses. |
| Facility | $40.0M revolving loan-on-loan facility |
| Collateral | Pledged whole loans (notes and mortgage assignments held by a custodian), control of the collections account, and a parent guaranty |
| Advance | 65% of the lower of unpaid balance or our collateral value, about 40% of the underlying real estate’s value |
| Term | 24-month revolving period plus a 12-month amortization period |
| Pricing | S+600 (≈9.75%); 0.50% unused fee; 1.00% origination |
The situation
The lender was funded with $55M of equity and a $60M bank warehouse line. To reduce its commercial real estate exposure, the bank cut the line to $30M and raised the price. The lender originates $20–25M a month and would have had to stop lending, and lose its broker relationships, within weeks.
Which loans qualify
- First lien only. The borrower’s as-is LTV must be at or below 70% (or loan-to-cost at or below 80% for renovation loans).
- Loans up to $5M. No single borrower above 7.5% of the pool, no state above 35%, and ground-up construction capped at 10%.
- Undrawn holdbacks get no advance.
- Loans 30–59 days delinquent get a 50% advance. Loans 60+ days delinquent, or matured for more than 90 days, are ineligible.
- We re-underwrite every loan over $3M and a 25% sample of the rest, reviewing appraisals, title and site visits.
Structure
- A third-party custodian holds the original notes, and we receive recordable mortgage assignments for every pledged loan.
- Borrower payments sweep weekly into an account we control.
- A backup servicer was engaged at closing, and we can replace the servicer after a default.
- Portfolio triggers: if loans 60+ days delinquent exceed 6% of the pool, the advance rate drops to 55%. Above 10%, the facility starts amortizing and 100% of collections repay Caldrion.
- Corporate covenants: tangible net worth of at least $45M, debt-to-net-worth no higher than 2.5x, at least $6M of unrestricted liquidity, and a key-person clause on the two founders.
Look-through math
Borrowers’ loans average 62% LTV, and we advance 65% of that, so our exposure equals about 40% of the property value. Real estate values would have to fall about 60% before our principal was at risk, and the lender’s equity and corporate guaranty sit in between.
Risks and mitigants
| Risk | Mitigant |
|---|---|
| The lender’s underwriting gets looser | Eligibility criteria; we re-underwrite loans |
| Regional housing correction | 40% look-through LTV; state caps |
| The lender becomes insolvent | Custodian holds the notes; backup servicer; a direct path to the borrowers |
| Fraud, such as pledging a loan twice | Custodian, lien searches, recorded assignments |
Exit and returns, as underwritten
The lender either builds a multi-bank warehouse or securitizes its seasoned loans. Otherwise the facility pays itself down, since the underlying loans average about 12 months. Target: about a 10.3% IRR at roughly 80% utilization.
See all our transactions, the twelve loans compared and our criteria.
This case study is provided for information only. It is not an offer of securities or investment advice, and targeted results do not indicate future results.