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Monday, 05 February 2018

Online Marketplace Seeks to Make Financing More Efficient for Borrowers, Lenders

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Commercial Real Estate Direct Staff Report

Some $700 million of loan requests have gone through the RealAtom online platform, which was launched in October 2016 to match borrowers looking for commercial real estate financing with prospective lenders.

The Arlington, Va., company is in the process of raising what it hopes would be $2 million of funding from a private equity firm, real estate developer and individual investors that it would use to add staff and enhance its website.

So far, 505 lenders have signed up, including banks, life insurance companies, agency lenders and alternative lenders. When borrower requests are logged in, they're matched with the most suitable lender. Suitability is determined by algorithms RealAtom has developed. Underwriting and closing is done offline, but the company hopes to automate much of that process as well.

Successful borrowers pay a 50 basis-point fee when their loans closes. Prospective borrowers have asked for loans of $1 million to $75 million against apartment, hotel, office and retail properties. The majority of RealAtom's loan requests range from $7 million to $25 million.

"Right now, the main issue is the industry is opaque," said Yulia Yaani, RealAtom's chief executive and co-founder, who has started two companies and previously managed Eastern European real estate investments for Amstar Group of Denver. "Our goal is to make every step of the process as transparent as possible for both borrowers and lenders. We want to make life for lenders and borrowers easy and transactions more efficient."

In the late 1990s and early 2000s, dozens of companies with similar strategies were launched and had raised buckets of capital, only to fail. Those included CapitalThinking, which sought to match lenders with borrowers via its website, but failed to gain traction in 2000, even after raising some $30 million of investor capital; MortgageSelector, which was backed by seasoned mortgage professionals from Nomura Securities and what then was GMAC Commercial Mortgage; CapitalEngine.com, which was backed by Greenwich Capital Group; Redbricks.com, which was founded by a former Prudential Financial operation and at one point had received queries for more than $5.5 billion of loans, and Precept Corp., which included Morgan Stanley and Standard & Poor's among its investors. While each had a slightly different strategy, at their root was an effort to improve the automation and transparency in the mortgage lending process. But they all failed to convince property owners and lenders to move much of what they did to the Internet.

RealAtom's founders, Yaani and Masha Sharma, believe their effort will be successful because technology has improved since the early 2000s, more data are available and people are now more willing to use the Internet for sophisticated financial transactions.

RealAtom uses online travel marketplaces such as Kayak as examples of companies that have changed the ways industries operate. Travel agents are still around, but they are not as dominant as they were before the online marketplaces took off.

Lenders typically work with firms such as HFF and JLL to secure financing. Yaani said those companies "aren't going anywhere," but she added that she believes lenders could benefit from going online in certain circumstances, particularly for small loans.

"We're in an industry that's rather complex, but there are a lot of transactions that can be streamlined," she said.

RealAtom plans to improve its platform this year. As of now, borrowers can sometimes get matched with 70 or 80 lenders that meet their criteria - burdensome for them to go through the offers. The company hopes to strengthen its algorithms so it could improve its loan-matching capabilities.

"We want to make the match so precise that you have one loan request and you match it to two or three lenders that can definitely close on the transaction," Yanni said. "We want the borrowers to know that once they put the loan on the platform, they will get a lender that will close."

Comments? E-mail Tim Casey or call him at (267) 397-3347.



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Data Digest

 

CMBS DELINQUENCY VOLUME

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CMBS SPECIAL SERVICING VOLUME

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Top Bookrunners Domestic, Private-Label CMBS - 2017
Investment Bank #Deals Vol$mln MktShr%
Goldman Sachs 17.59 11,819.34 13.68
JPMorgan Securities 14.52 10,968.11 12.70
Citigroup 12.04 10,012.71 11.59
Wells Fargo Securities 14.02 9,936.06 11.50
Deutsche Bank 12.55 9,879.74 11.44

 

RCA CPPI

 

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CMBS 2.0 Spreads

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Top CMBS Loan Contributors - 2017
Lender #Loans Vol$mln MktShr%
Goldman Sachs 146.89 11,719.34 13.63
JPMorgan Chase Bank 117.68 10,114.14 11.76
Deutsche Bank 198.48 9,689.97 11.27
Morgan Stanley 166.18 8,539.78 9.93
Citigroup 199.05 8,088.24 9.41

 

 

 

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