Builders Capital Opportunity Fund

BCOF is accepting up to $75M in Class A debt investment and up to $125M in Class B equity investment.

Opportunity

Favorable Environment For Residential Construction Lending

  • Banks significantly reduced and/or exited residential construction lending after 2008, resulting in a national underinvestment in housing.
  • The lack of financing for utility infrastructure and streets, coupled with growth management and long entitlement cycles, constrains buildable land in most fast-growing markets. This favors publicly-traded builders. Even outstanding, best-in-class local and regional builders feel pinched.
  • 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 in large part due to demographic tailwinds.
  • Demand significantly exceeds supply of new AND resale homes.

    Current Market Conditions Differ Radically from 2008

    • Sharply decreased inventory levels for both new and existing housing stock and most notably, buildable lots.
    • Long development cycles for new lots limits the pace at which supply can be added.
    • Monthly sales absorption being held in check by the diminished supply.
    • There is an estimated housing shortage of 1,000,000 units as of the end of the 2nd quarter 2019!

    Demographic Tailwinds

    • Median Age of 1st Time Homebuyer is now ~ 34 years.
    • Millennials and Gen Z are both much larger than Gen X.
    • Economic pressures and lack of savings pushed Millennials into apartments.
    • Millennials have not yet fully engaged in homebuying due to lack of inventory.
    • As Millennials age, they’re accumulating savings, having children and forming households. 
    • This was delayed by the Great Recession and now many are priced out of urban cores.

    Track Record

    (*) – Quarterly distributions through December 31st, 2019

    Builders Capital has deployed $1,600,000,000+ in loan commitments, over 2,000 loans, and continues to grow to meet robust demand. During this time, Builders Capital Predecessor Funds have delivered strong results for CLASS B INVESTORS (Preferred return & profit share).

    COP

    Construction Opportunity Partners No. 1 LLC (Closed)

    %

    Cumulative Distributions Since Launch*

    %

    Average Annual Yield Since Launch

    December Launch Date

    NCF

    Northwest Construction Fund (Closed)

    %

    Cumulative Distributions Since Launch*

    %

    Average Annual Yield Since Launch

    December Launch Date

    BCOF

    Builders Capital Opportunity Fund

    %

    Cumulative Distributions Since Launch*

    %

    Average Annual Yield Since Launch

    January Launch Date

    Builders Capital Opportunity Fund

    Product Types: Single Family Residential, Attached & Detached, Small to Midsize Multifamily.

    • Typical Loan Terms: Loan Term (At Origination): 9-12 months for Single-Family, 12-22 months for Multifamily.
    • Loan Size: $100,000 – $10,000,000.
    • Max LTV (Loan To Value): Less than or equal to 70% for Ground Up, 75% for Bridge, 75% for Fix-&-Flip.
    • Borrower Equity: At least 10% of costs.
    • Personal Guarantees: Unconditional – exceptions considered with additional security and/or completion + corporate guarantee.
    • Builders Capital was formed in 2009 to specialize in residential construction loans to homebuilders in select markets.
    • Under regulatory pressure, banks exited or reduced construction lending, creating a long-term business opportunity for higher returns, at a lower risk, than historical norms.
    • To take full advantage of this opportunity, we built a team with deep expertise in residential home building, land development, portfolio finance, mortgage banking, underwriting, and collateral management.
    • Primary focus on close-in urban/suburban areas.
    • Lend to experienced builders/developers with proven track records.
    • Low to moderate loan-to-value ratios (equity cushion).
    • Short duration loans to reduce market risk – average term at origination is currently roughly 12 months.
    • Rigorous collateral monitoring (monthly site inspections, date down endorsements, public data monitoring).
    • Prudent use of debt to manage portfolio cash flow.

    Comprehensive Underwriting:

    • Valuations are done both by Independent 3rd Party Appraisal and Builders Capital Regression / Market Absorption Analysis, Financial Suitability, Guarantor Review, Budget Review, Specifications Review.

    Ongoing Borrower Monitoring:

    • Public Record Monitoring, Financial Monitoring, Interest Reserve and Payment Monitoring, Tracking of Sales Activity, 3rd Party Site Inspections with Each Draw.

    Case Studies

    Address:

    4633 E Gabbro Way Nampa, ID 83686

    Project Description:

    Building one SFR in the last phase of the Lava Springs subdivision in Nampa, ID. The subject home is 1,907 square feet, with 3 bedrooms and 2 bathrooms.

    Borrower Profile:

    The Borrower/Builder for this loan has been involved in construction/renovation since 2005, and previously built homes with his father and uncle until he began building on his own.

    Loan Amount:
    $233,730
    Term:
    5 Months
    Loan to Value:
    70%
    Additional Security:
    Personal Guarantee
    Expected IRR:
    27%
    Current Status:
    Paid in Full
    Actual Final IRR:
    30.06%
    Loan Number:
    71476

    Link to Listing:

    https://www.movoto.com/nampa-id/4633-s-gabbro-way-nampa-id-83686-561_98736501/

    Address:
    3111 NE 43rd St Vancouver WA 98663

    Project Description:
    This 11,000 square foot site is located in the West Minnehaha neighborhood of Vancouver. The build is a 1,962 square foot home, with 3 bedrooms and 2 bathrooms.
    Borrower Profile:
    The Borrower for this loan consists of two guarantors. One started building in 1982 and is directly involved in all his builds. He has developed over 3,000 lots in Clark County over his career (buying, developing and building), and has built over 2,000 houses. The other worked in the real estate industry for over 48 years. He has built and sold 145 homes over the past three years and is currently building out his retirement portfolio with investment properties.
    Loan Amount:
    $220,651.51
    Term:
    6 Months
    Loan to Value:
    56.58%
    Additional Security:
    Personal Guarantee
    Expected IRR:
    23.55%
    Current Status:
    Paid in Full
    Actual Final IRR:
    26.58%
    Loan Number:
    71458

    Link to Listing:
    https://www.redfin.com/WA/Vancouver/3111-NE-43rd-St-98663/home/169842556

    Addresses:
    1250 SW Albenga Ave, Port Saint Lucie, FL
    3132 SW Ann Arbor Rd, Port Saint Lucie, FL
    1686 SW Abingdon Ave, Port Saint Lucie, FL
    1020 SW McCoy Ave, Palm Beach, FL
    1987 SW Gold Lane, Port Saint Lucie, FL
    1673 SW Carillo Ave, Port Saint Lucie, FL
    743 SW Estate Avenue, Port Saint Lucie, FL
    37953, Port Saint Lucie, FL
    4149 SW Darien St, Port Saint Lucie, FL
    1791 SW Gloria Lane, Port Saint Lucie, FL

    Project Description:
    This is 9 simultaneous loans for the construction of 9 single-family homes in Port St Lucie, Florida. The single-family homes will range from 1,336 sq ft up to 1,869 sq ft, with 3 to 4 bedrooms, 2 baths, and 2 car garages.
    Borrower Profile:
    The borrower focuses on an affordable price point homes, in 2018, they built and sold over 200 units.   The first guarantor has been in the home building industry for over 30 years and has been involved in the building of thousands of residential homes throughout the Southeastern United States. The second guarantor has been building for over 20 years and has been involved in building over 1,000 residential homes throughout Florida.
    Total Loan Commitment:
    $1,552,211.70
    Average loan size:
    $172,468
    Term:
    12 Months
    Loan to Value Overall:
    69.42%
    Additional Security:
    Personal Guarantee
    Expected IRR Average:
    13.94%
    Current Status:
    4 Pending Payoff, 5 Nearing Completion
    Loan Number:
    71663-71668

    Link to Listings:
    https://www.zillow.com/homedetails/1250-SW-Albenga-Ave-Port-Saint-Lucie-FL-34953/103531367_zpid/
    https://www.zillow.com/homedetails/3132-SW-Ann-Arbor-Rd-Port-Saint-Lucie-FL-34953/103541753_zpid/

    Address:
    3221 Beckwith Run, Broomfield, CO 80023
    16381 Graham Peak Way, Broomfield, CO 80023

    Project Description:
    This loan if for two single-family homes in Anthem Highlands master-planned community in Broomfield, CO.  Both of the homes are presold, the buyers have also selected the same structural options for their homes, including a finished walk-out basement with wet bar and a bonus room on the upper level.
    Borrower Profile:
    The borrower is a highly successful homebuilding executive and has over 20 years of experience in construction. The guarantor prior to building on her own worked for a national builder. During her tenure, she tripled the size of the division and put the builder on the map as one of the largest and most widely recognized builders in the Denver market, building over 1500 homes during that period. She also served as the 2015 Homebuilders Association of Metro Denver President. The borrower is slated to complete 50 homes in 2019 and 80 Homes in 2020.
    Loan Amount:
    $1,640,471.98
    Term:
    10 Months
    Loan to Value:
    65.47%
    Additional Security:
    Completion Guarantee
    Expected IRR:
    18.17%
    Current Status:
    Paid in Full
    Final IRR:
    18.80%
    Loan Number:
    71319

    Link to Listings: NA

    Address:
    1778 & 1780 Alki Ave SW, Seattle, WA 98116

    Project Description:
    This project is six townhomes in Alki, consisting of two buildings with three units in each. There will be a shared courtyard connected between the two buildings. Each unit will also have rooftop decks with expansive views of Puget Sound. The units range from 1,414 sq ft to 2,047 sq ft with a designated parking spot for each unit.
    Borrower Profile:
    The borrowers for this project are both very experienced real estate developers. One has been in real estate development for over 25 years and is a managing broker at his real estate firm while the other owns and develops real estate primarily in Washington as well as Korea. They partnered over the last 5 years.
    Loan Amount:
    $4,060,471
    Term:
    14 Months
    Loan to Value:
    64.4%
    Additional Security:
    Personal Guarantee
    Expected IRR:
    19.99%
    Current Status:
    In Process
    Loan Number:
    71650

    Link to Listings:
    NA

    Address:
    251 Equinox Dr., Cle Elum, Washington 98922

    Project Description:
    Plans are to build a luxury 3,002sqft, 4 bedroom, 3.5 bathroom house. The property is located in the Suncadia community of Cle Elum, it is on a level golf frontage site on #17 of the Prospector Course. Prime central location on a non-through street and near Battista Park & Swiftwater winery.
    Borrower Profile:
    One of the borrowers for this loan is has been in the renovation and new construction industry for the past 20 years. The other borrower received his master’s degree in project management from the University of Maryland UC. He began as a Journeymen Carpenter constructing and maintaining facilities for the United States Air Force and has been in the construction industry for over 20 years.
    Loan Amount:
    $898,898.20
    Term:
    10 Months
    Loan to Value:
    69.41%
    Additional Security:
    Personal Guarantees
    Expected IRR:
    25.02%
    Current Status:
    Paid in Full
    Final IRR:
    26.77%
    Loan Number:
    71342

    Link to Listings:
    https://www.redfin.com/WA/Cle-Elum/251-Equinox-Dr-98922/home/104474142

    Address:
    422 16th Ave S Seattle, WA 98144

    Project Description:
    The subject property is a 3,920sqft corner lot located in the Central District of Seattle. Plans are to build 5: 3-story row-houses. Each row-house will consist of 3 bedrooms and 2 bathrooms, and rooftop decks with views of downtown Seattle.
    Borrower Profile:
    The borrower is an experienced Real Estate developer with over 20 years in the industry. The borrower founded an insulation and weathering proofing company in 2013. The company is a market leader with over 75 years of combined experience between their staff of weatherization and energy experts.
    Loan Amount:
    $2,180,250
    Term:
    12 Months
    Loan to Value:
    64.60%
    Additional Security:
    Personal Guarantee
    Expected IRR:
    19.15%
    Current Status:
    Nearing Completion
    Loan Number:
    71369

    Link to Listings:
    NA

    Address:
    250 NW 30th Street, Redmond, OR 97756

    Project Description:
    One of four Single Family Homes in Redmond, OR closed simultaneously. These homes are part of a larger development in Central Oregon where the borrower has successfully completed 60 of the 90 homes so far. These are the next four lots they are taking down. The finished homes will be between 1,012 to 1,756 sq ft.
    Borrower Profile:
    The borrower had been in the real estate industry for 40+ years when in 2008 he decided to start his own construction company.  After working for some of the nation’s top builders, he was ready to take their strengths and combine them with his expertise to start building great homes for an exceptional value in Central Oregon. Over the past 12 years, the borrower has completed homes all over Deschutes County.
    Loan Amount:
    $207,157
    Term:
    12 Months
    Loan to Value:
    69.99%
    Additional Security:
    Personal Guarantee
    Expected IRR:
    19.23%
    Current Status:
    Paid in Full
    Final IRR:
    23.74%
    Loan Number:
    71233

    Link to Listings:
    https://www.zillow.com/homedetails/250-NW-30th-St-Redmond-OR-97756/103769765_zpid/?mmlb=g,20

    Address:
    1408, 1440, 1488 West Cerulean St., Kuna, ID 83634

    Project Description:
    Building three SFR in the first phase of the Cazador subdivision in Kuna, ID. Kuna is one area where builders are building more affordable housing in the Treasure Valley. It is closer to Downtown Boise than Nampa or Caldwell and has great schools. Given the affordability issues, this is where native Idahoans are moving into their upgrade homes.
    Borrower Profile:
    This borrower has 15 years of experience in new construction and home renovation. They have successfully built seven new construction homes since 2005 and continue to grow their portfolio. This borrower also specializes in design for other home builders.
    Loan Amount:
    $861,700
    Term:
    7 Months
    Loan to Value:
    70%
    Additional Security:
    Personal Guarantee
    Expected IRR:
    22.25%
    Current Status:
    In Process
    Loan Number:
    71456

    Link to Listings:
    https://www.redfin.com/ID/Kuna/1488-W-Cerulean-Dr-83634/home/168445056

    Project Description:
    Four single-family detached condos on one parcel in the Houghton neighborhood of Kirkland. The site is conveniently located two blocks from PCC, Starbucks and Metropolitan Market and easily walkable to downtown Kirkland and Google.
    Borrower Profile:
    Borrower is a design/build company consisting of two partners who are actively involved in all aspects of the project.  One partner brings to the company a degree in architecture along with many years of experience working at an architectural firm in Chicago.  The second partner brings 30 years of field experience working his way from a finish carpenter and skilled craftsman to running both commercial and residential projects.  The company is financially backed by an investor who provides all equity capital needed.
    Loan amount:
    $3,709,828
    Term:
    12 Months
    Loan to Value:
    66%
    Additional Security:
    Personal Guarantee
    Initial expected IRR:
    25%
    Current Status:
    Paid in Full
    Actual Final IRR:
    31%

    Project Description:
    38,246 square foot lot zoned RS-8 that will be subdivided into four lots which are 8,400 to 8,600 square feet each. All four homes will be approximately 2,600 to 2,700 square feet each with four bedrooms and 2.5 bathrooms.
    Borrower Profile:
    The borrowers are a husband and wife team who have been developing land and building homes for the past 26 years, having built hundreds of homes during that period. A few years ago, they began a 501(c)(3) nonprofit organization to send doctors, special educators, behavior specialists, etc., to Mexico every quarter.
    Loan amount:
    $398,200 average per lot
    Term:
    8 Months
    Loan to Value:
    69% average per lot
    Additional Security:
    Personal Guarantee
    Expected IRR:
    26%
    Current Status:
    Paid in Full
    Actual Final IRR:
    28%

    Project Description:
    With sweeping views of Lake Washington, this 1-acre zoned R-6 will be the future construction site to six zero lot line townhomes.
    Borrower Profile:
    The borrower is a special purpose limited liability company, whose owners have been land developers, homebuilders, and a franchise owner for over 20 years. Their construction business is supported by fast-food franchise ownership as well as income through ownership of a family farm. They invest in real estate in the core of King County building new homes, townhomes as well as development projects.
    Loan amount:
    $415,828
    Term:
    9 Months
    Loan to Value:
    60%
    Additional Security:
    Assignment of LLC equity interest in addition to the Deed of Trust on additional real estate assets.
    IRR:
    21%
    Current Status:
    Paid in Full
    Actual Final IRR:
    24%

    Testimonials

    Just closed a $3.1 mil loan with Builders Capital. This deal had multiple problems to put it mildly. The team at BC reacted to each hurdle with a perspective of how to solve the problem not how to walk away. Professional, persistent, responsive. The gold standard in my book.

    Edward Hupp

    Any time I am asked about Builders Capital, I say the same thing: "Builders Capital is the first lender I’ve ever worked with that did what they said they would do."

    Corey Elitharp

    RSI Construction

    Our Team

    Curt Altig
    Chairman & Founder

    Mr. Altig is a 27-year veteran of the Mortgage Banking industry who brings an array of loan origination expertise, construction lending experience, sales, marketing, management and leadership skills to the organization. Mr. Altig’s responsibilities at the Company include sales, marketing and the development of the Company’s loan business. Prior to co-founding the Company, Mr. Altig spent five years as a Regional President for First Horizon Home Loans (now MetLife) overseeing $2+ billion a year in loan production across 18 branch offices. His responsibilities at First Horizon included retail and wholesale originations, custom construction financing, mortgage operations, financial services, underwriting management and compliance oversight. Mr. Altig is a graduate of the University of Washington.

    Robert Trent
    CEO

    Mr. Trent was recognized in 2010 by the Puget Sound Business Journal for having one of the “100 Fastest Growing Private Companies in Washington State,” and selected as a “Top 40 under 40 Business Leader.” Mr. Trent is a highly successful entrepreneur who founded SDC Homes in 2008 at the onset of the credit crisis. Mr. Trent was innovative and restructured the way he built and sold homes which allowed him to deliver over 300 plus housing units annually, with over $100 million in annual sales. Mr. Trent has built and sold close to 2,000 homes in his career throughout the Pacific Northwest and developed a business model that took SDC Homes to one of the top three homebuilders in Washington State by 2010. In the spring of 2011, Mr. Trent made the decision to accept a bid from one of the nation’s top 10 homebuilders to purchase his companies. Mr. Trent served as Division President for Richmond American Homes (NYSE-MDC) from 2011 to 2013, after which he returned to the world of private investment and took on an active role with Builders Capital.

    Robert Hadley
    Co-Founder

    Mr. Hadley is the Chairman of Hadley Properties, LLC, a third-generation development company with a long history of technical and real estate innovation. Hadley Properties has developed a broad range of innovative projects, spanning residential, resort, office, hospitality, and industrial product types across multiple states. The organization was the first to successfully employ the timeshare model in Hawaii and the first to build a structural steel high rise in Hawaii. Having recently completed a 251 resort home development on a nine-hole executive golf course overlooking the Columbia River in Washington State, the organization is currently engaged in the Brownfield redevelopment of one of the largest urban mine tailings sites in North America into Colorado Springs’ first neotraditional neighborhood community, having developed and sold over 425 home sites; the development of a tower hotel in Honolulu, Hawaii; and the development of a residential resort community in central Washington State, among others. Mr. Hadley holds degrees in civil engineering and quantitative economics from Stanford University.

    Summary of Terms

    Fund Structure

    Builders Capital Opportunity Fund LLC is a Washington limited liability company. Its sole member and manager is BCOF 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).

    Affiliate Servicing

    An affiliate of the Fund, Construction Loan Services II LLC (d/b/a Builders Capital) originates, underwrites, and services the Fund’s loans. The Fund will pay a market rate servicing fee presently equal to 29.2 bps per month based on the total commitments of the Fund. The Fund will also reimburse the servicer for out of pocket expenses.

    Management Compensation

    No fixed management fee. BCOF Manager is reimbursed only for its out-of-pocket expenses that benefit the Fund, and as compensation, BCOF Manager receives 70% of the profits of the Fund after payment of all Class A interest and Class B preferred return. This is intentionally done to better align management’s interests with those of the investor.

    Class A First Deed of Trust Secured Notes

    Returns

    Fixed rate of return, dependent upon the amount of commitment on a 24 month note.

    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 55% 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.

    Note Amount:
    Less than $499,000

    Note Rate:
    6%

     

    Note Amount:
    $500,000 – $1,999,999

    Note Rate:
    7%

     

    Note Amount:
    $2,000,000 – $9,999,999

    Note Rate:
    8%

    Note Amount:
    $10,000,000+

    Note Rate:
    9%

    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 180 days after initial investment (subject to availability).

    Priority

    In a liquidation, Class B is junior in priority to Class A.

    Fund Capital Structure

    Less Secure

    More Secure

    Note To Investors

    This draft material does not constitute an offer and is authorized for use only when accompanied or preceded by the final Private Placement Memorandum, Subscription Agreement and related documents (the “Offering Package”), and is qualified in its entirety by the Offering Package. Reference is made to the Offering Package for a statement of risks and terms. This material contains forward-looking statements that involve risks and uncertainties. The Fund’s results may differ significantly from those described in this material or the Offering Package.

    Our Office

    5601 6th Ave S., Suite 350
    Seattle, WA 98108

    Contact Us

    888.540.9009

     

    Office Hours

    Mon-Fri: 9am - 5pm
    Sat-Sun: Closed

    BUILDERS CAPITAL® and the Builders Capital logo are registered trademarks of HAT LLC in the U.S. and are used under license by Construction Loan Services LLC and Construction Loan Services II, LLC