California based real estate investment platform PeerStreet, Inc. and 14 affiliated debtors filed for protection under Chapter 11 of the U.S. Bankruptcy Code in a Delaware court on Monday, citing a challenging mortgage market and struggles to raise capital with venture capital funds.
Thank you for reading this post, don't forget to subscribe!“Through its bankruptcy filing, PeerStreet will seek to sell all of its assets, including its mortgage lending assets and technology platform, in a series of transactions aimed at maximizing value for all of Peer Street’s stakeholders, but it Not limited to these.” the firm said in a statement.
Founded in 2013 by Bruce Johnson, Brett Crosby and Alex Perelman, PeerStreet developed a marketplace connecting lenders and borrowers seeking capital with investors seeking real estate related loans. The business attracted investor Michael Bury, one of the key players in “The Big Short”.
The Company solicits loans from private lenders and brokers, which are offered for sale to institutional investors or posted on the Company’s online platform. In addition, PeerStreet acts as a master servicer and manages the loan on behalf of the investors.
David Dunn of The Advisory Firm provincePeerStreet’s chief restructuring officer cited in court filings that the Chapter 11 case was triggered by rising rates, decreased demand for mortgages, and institutional buyers’ declining appetite for loans below current market rates.
PeerStreet, which has a subsidiary mortgage lender and servicer, projects only $5.4 million in mortgage loans to be originated in 2023, compared to $385 million in 2022 and $695.8 million in 2021, Dunn wrote. For the 12 months ending December 2022, PeerStreet and other debtors totaled revenue of approximately $37.4 million, down 23.2% from the prior year.
“Moreover, in 2022, one of PeerStreet’s historical sources of funding – venture capital – is set to decline significantly. As a result, PeerStreet was not able to access physical funding to offset the loss of revenue caused by market conditions,” Dunn said in the court filing.
HousingWire reports that PeerStreet raised $30 million in 2018 and $60 million in 2019.
The company attracted big names among its investors, including Silicon Valley venture capital firms Andreessen Horowitz, Because of which Its Series A funding round in 2016 was $15 million. Barry was one of PeerStreet’s first investors in 2015.
Peerstreet and other debtors had 28 employees when it filed for Chapter 11 on Monday, compared to 281 at the end of May 2022. Its workforce was reduced through four rounds of layoffs and layoffs – May 2022, July 2022, October 2022 and February 2023.
The company asked the court to authorize the payment of $130,000 in unpaid wages and $100,000 to key vendors, among other requests.
According to court filings, PeerStreet has an estimated 100-199 creditors, and has assets and liabilities of between $50 million and $100 million. However, as of Monday, the group had $4.4 million in cash – in addition to $18.5 million in its mortgage business.
piper sandler PeerStreet will be the broker responsible for selling the property.
