Private Credit Investments
Further diversify your real estate portfolio
Borrower payment dependent notes (BPDNs) represent participations in real estate-backed debt investments. The payments of these notes are tied to payments from an underlying loan on commercial real estate.
These fixed-income instruments are designed to offer investors predictable returns while diversifying their portfolio through a new asset class.
◆ Underlying Secured Loan: Each note is tied to payments from a loan secured by real estate, helping mitigate risk.
◆ Predictable Fixed Returns: Designed for investors seeking steady income from payments tied to real estate debt.
◆ Fixed Maturity Date: These investments will have a set maturity date, generally less than 24 months.
◆ Attractive Yield Potential: With short-term rates increasing roughly 4.25% since 2021, private credit investments offer competitive returns and provide greater diversification.
◆ Market-Driven Opportunity: With traditional lending channels tightening, demand for alternative financing is growing, creating potential for compelling investment opportunities.
◆ Portfolio Diversification: A new way to balance your real estate investments between equity and debt.
What is a borrower payment dependent note (“BPDN”)?
A BPDN is an unsecured debt issuance by a single-purpose entity sponsored by RM Notes, a RealtyMogul subsidiary.
The note is tied to payments from an underlying loan on commercial real estate originated by a third-party loan originator. The note has an interest rate and term that are tied to the underlying loan.
How does a BPDN note work?
The underlying borrower pays interest to the loan originator monthly, which cash flows are used to pay interest and principal to an RM Notes Special Purpose Entity and in turn, BPDN investors.
How frequently will I receive interest payments?
We are seeking investments with monthly interest payments.
What tax filing form will I receive?
1099-INT
What happens if the underlying loan defaults?
Given that BPDNs are tied to the underlying loan, the underlying loan agreement will dictate what is required in order to cure any event of default.
What happens if the underlying loan pays off early?
Given that BPDNs are tied to the underlying loan, if the underlying loan were to be paid off prior to the stated maturity date then the BPDN would also be paid off at that time.
What happens if the underlying loan extends?
Given that BPDNs are tied to the underlying loan, if the underlying loan were to be extended past the stated maturity date, then the BPDN would also be extended to the updated maturity date.
Will my regular interest payments change throughout the life of the loan?
Given that BPDNs are tied to the underlying loan, the only instance where expected interest payments would change is if the underlying loan payments from the borrower change.
What types of loans are we investing in?
We plan to pursue high-yielding loans that offer attractive risk-adjusted returns to BPDN investors. Sample structures are (i) senior loan participations, (ii) A Note / B Note, and (iii) levered loans.
What business plans are expected for the properties?
We will be targeting loans for transitory business plans (e.g., value add and turnaround), special situations (e.g., distressed property refinance), and new construction. These loans typically command a higher interest rate for investors. We want to offer an interest rate to investors that far exceeds the rate one can achieve from U.S. treasuries and corporate bonds.
What are some of the risks involved?
Underlying loan pays off early – Investors would receive a lower equity multiple, and fixed expenses at the RM Notes Special Purpose Entity entity level would reduce investor returns and/or cause principal loss to the BPDN.
Underlying loan default – In the instance of a monetary default, payments would stop to noteholders until the default is cured and any expenses associated with the default are paid. This may lead to the loss of principal of the BPDN.
Underlying loan modification – If the loan originator modifies the loan, the BPDN would be modified to match, which may lead to lower returns and/or cause principal loss to the BPDN.
Limited/no recourse – While the underlying loan is secured by a property, BPDNs are unsecured debt issued by an RM Notes Special Purpose Entity.
What updates will investors receive on the project?
Investors should expect to receive updates upon material events at the property.
Why couldn’t an investor go directly to the lender to invest?
Private lenders have exceedingly high minimum investment amounts for private investors, if they allow them at all. We created this product to provide an offering to the general public that is typically reserved for funds or ultra-high net-worth investors.
What is the process if I want to exit early?
This offering does not allow for the ability for repayment prior to the underlying loan being repaid.
Investments in BPDNs are speculative, highly illiquid, and involve substantial risk, and you should not invest unless you can risk losing all your capital. All information about any deal is qualified in its entirety by the offering documents that must be reviewed prior to investing, including risk factors, investment objectives, business plans, charges, expenses, and other important information. Advice from a financial, legal, tax, or other professional advisor is highly recommended.