Northwest Construction Fund LLC - SBREfunds.com

Northwest Construction Fund LLC

Non-Broker Vetted

Opportunity Overview

  • Asset Type:
  • Strategy Type:
  • Income Type:
    Income
  • Minimum Investment:
    $100,000
  • Target Return:
    10% to 12%

Investment Highlights

Favorable Environment For Residential Construction Lending

This is driven by:

  • Banks significantly reduced and/or exited residential construction lending creating a scarcity of capital.
  • Regulatory environment continues to keep national banks out of the market and constrain regional banks.
  • There is a growing demand for homes in markets that have strong economies.
  • Demand significantly exceeds supply of new AND resale homes.
  • Growth Management Act constrains available buildable land, and 4 to 8 year development cycle is further constraining land supply. With large tracts becoming less available, opportunities arise for smaller, custom builders.

Key Portfolio Attributes

Focus on close-in urban areas in the Pacific Northwest.
• We select experienced builders with proven track records.
• Low to moderate loan-to-value ratios (equity cushion).
• Short duration loans (average term < 10 months at origination) to reduce market risk.
• Rigorous collateral monitoring (monthly site inspections, date down endorsements, public data monitoring).
• Prudent use of debt to manage portfolio cash flow.

Investment Terms

Fund Structure:

Northwest Construction Fund LLC is a Washington limited liability company. Its sole member and manager is NCF Manager LLC. Investments in the Fund are either by purchase of non-voting economic interest units (Class B Units) or secured first deed promissory notes (Class A Notes). A portion of each loan is allocated to a loan loss reserve.

The fund is accepting up to $20M in Class A debt investment and up to $20M in Class B equity investment.

First Deed of Trust, Class A Secured Notes:

  • Returns: Fixed rate of return, dependent upon the amount of note and the length of
    term. As of Q3 2016, Class A Note returns range from 4% to 6%.
  • Interest Payments: Interest paid quarterly.
  • Security: Class A Notes, as a pool, are secured by first position deeds of trust; the
    Class A Note amounts may not exceed 65% of the finished value of the underlying real
    estate collateral (measured at origination).
  • Prepayment: The Fund may prepay Class A Notes at any time without penalty or
    premium.

Class B Units:

  • Structure: Non-voting economic interests in LLC.
  •  Returns: Preferred return of 8%, plus 30% of LLC profits (after payment of preferred
    return).
  • Distributions: Distributions of preferred return and profit-share are made quarterly, as
    funds are available.
  • Redemption: The Fund may redeem an investment at any time. Investors may
    redeem with 12 months notice any time at least 60 days after initial investment
    (subject to availability).
  • Priority: In a liquidation, Class B is junior in priority to Class A.

Asset-Level Information

  • Product Type Single family residential: attached and detached
  • Small to midsize multifamily
  • Loan Term (At Origination)
    9-12 months at origination for single family
    12-22 months at origination for multifamily
  • Loan Size $100,000 – $5,000,000
    LTV Less than or equal to 70%
    Personal Guarantees Unconditional – Exception only with additional security
    Builder Equity Greater than or equal to 10% of costs

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  • What is Northwest Construction Fund, LLC?

    Northwest Construction Fund, LLC (the “Company”) was formed to provide investors
    with the opportunity to invest in construction loans made to production homebuilders. Many
    banks and other financial institutions have scaled back the residential construction lending
    business, allowing room for an experienced private finance company to take advantage of
    significant lending opportunities.

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