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Managing Risk

Our Focus

Our approach to managing risk is grounded in a meticulous and conservative underwriting process that prioritizes downside protection. We recognize that every investment carries inherent risks, which is why we focus on creating a robust framework that safeguards our capital while maintaining the potential for strong returns.

Risk Management Criteria

Asset value

Insurance coverage/loss payee

Personal guaranty or equity pledge

Skin in the game

Demonstrated borrower track record

Favorable lending laws

Underwriting with Downside Protection

Underwriting with Downside Protection

At the core of our risk management strategy is a focus on the worst-case scenario. We rigorously analyze each deal to ensure that, even in the event of foreclosure, our position is secure. By requiring significant borrower equity in each project, we not only reduce the likelihood of default but also align our interests with those of our borrowers. This conservative approach has been highly effective; to date, we have never had to foreclose on a property, as our borrowers are deeply invested in the success of their projects.

Comprehensive Property Value Analysis

Comprehensive Property Value Analysis

We employ a combination of appraisal, cap rate valuation, and comparable sales analysis through local brokerages to determine the true value of each asset. This thorough evaluation ensures that we enter each investment with a clear understanding of the property’s worth and its potential in the current market.

Conservative Loan-to-Value Ratios

Conservative Loan-to-Value Ratios

We maintain a conservative loan-to-value (LTV) ratio, typically targeting 50% to 60%. This discipline ensures that our portfolio is well-protected, with substantial equity buffers that can absorb market fluctuations.

Experienced Underwriting Team

Experienced Underwriting Team

Our principals and underwriters bring extensive experience with the specific type of asset class and transaction at hand. Their expertise is instrumental in accurately assessing risk and making informed investment decisions.

Financial Strength and Capability Evaluation

Financial Strength and Capability Evaluation

We conduct a thorough evaluation of each borrower’s financial strength, including their assets, reserves, and overall financial capability. This assessment is essential in determining whether a borrower has the resources necessary to successfully complete the project and fulfill their obligations.

In-Depth Background and Experience Review

In-Depth Background and Experience Review

We carefully review each borrower’s track record, particularly as it relates to the specific type of project they are undertaking. This evaluation helps us identify any potential red flags and ensures that we are working with capable and reliable partners.

Defined Exit Strategy

Defined Exit Strategy

A clearly defined and realistic exit strategy is essential for every investment we make. We target projects with identifiable paths to completion and successful exits, aligned with project goals and timelines.