This Patch of Land is looking pretty fertile. The real estate crowdfunding firm raised $23.6 million in its Series A round, CEO Jason Fritton told The Real Deal.
The capital raising makes the California-based startup one of the best-funded real estate crowdfunding platforms in the U.S.
The fundraising round was led by investment firm SF Capital Group, whose president Neil Wolfson will join Patch of Land’s board. Ron Suber, head of peer-to-peer consumer lending platform Prosper, also invested in the firm.
The amount raised in Series A funding exceeds the approximately $17 million Patch of Land claims to have raised for real estate projects through its platform since it launched in 2013, highlighting the confidence its investors have in the real estate crowdfunding space’s further growth. In May, rival Fundrise raised a record $31 million from the likes of Silverstein Properties’ Marty Burger and Ackman-Ziff Real Estate Group.
Unlike major rivals such as Fundrise and iFunding, Patch of Land is a peer-to-peer lender — it exclusively originates loans. So far, the firm has focused on one-year residential purchase and rehab loans under $1 million. But flush with new capital, it is now looking to expand its range.
The firm will begin originating loans between $1 million and $5 million with terms of three to five years, Fritton said. It will also offer commercial and new-construction loans, and already has $15 million worth of loans in its pipeline.
The new funds are crucial to the planned expansion because Patch of Land pre-funds its deals. In other words, the firm commits a loan and then assumes the risk of finding enough investors through its platform to finance it. This approach is crucial to the startups appeal, Fritton said, because borrowers often need loan guarantees quickly. But it also requires significant cash reserves. Having the ability to pre-fund its deals was one of the key reasons why Fundrise set out to raise investment last year.
Fritton said Patch of Land also plans to use a big chunk of the money to hire new employees such as loan officers, underwriters and processors, and to invest in technology. The startup claims to operate in 15 states, and has originated a handful of loans in Greater New York. It recently closed, for example, on a $250,000 purchase and rehab loan for 714 Pennsylvania Avenue in East New York and a $350,000 purchase and rehab loan for 89-09 120th Street in Richmond Hill, Queens, both residential buildings.
Last month, Jared and Joshua Kushner raised $18.3 million for Cadre, a real estate investment vehicle catering to institutional investors, as TRD reported.