The Data Behind our First Billion in Loans
The data behind our first Billion in loans
Our financing marketplace just passed one billion dollars in closed transactions, which sounds like a lot.
Actually, for commercial real estate finance, it’s a relatively small number. StackSource still has less than one tenth of one percent market share in commercial mortgage origination. But we’re one of the fastest growing commercial mortgage companies in the country over the last three years since marking our first $100 Million origination year in 2020.
More importantly than the volume we’ve processed and closed with our platform so far, the combination of the proprietary tech and our managed service gives us a unique view into the data on lenders, loan quotes, and completed financings in our ecosystem. So as part of celebrating our first billion dollar milestone, I wanted to share some of the more interesting data points for our journey so far.
Scope of Data
The data in this post will be derived from the $1 Billion+ in loans closed on our platform for borrowers developing, acquiring, or refinancing property investments, and the capital sources funding those deals through our marketplace.
Unique borrowers funded for at least one property/deal.
Unique capital sources including banks, credit unions, debt funds, and more.
As a fintech helping real estate investors buying and developing properties across the country, our origination footprint has been anything but local. StackSource has arranged financing for multifamily and commercial properties in 43 US States so far.
We’ve arranged financing for some pretty varying and unique commercial property scenarios, but I’ve simplified that asset classifications here to fit into a few broad categories for simplicity. Mixed use properties are classified according to which use makes up the highest percentage of the property’s use.
There’s no surprise that StackSource has first and foremost provided capital solutions for multifamily properties more than any other asset class.
Interesting Data Points
Now that you understand the scope of the data we’re using for this analysis, here are some interesting data points about StackSource’s financing deal flow.
The smallest loan arranged on StackSource came in 2021, when we arranged a $130,000 acquisition loan for a small retail property in Lake County, IL that was half owner-occupied.
The average size and largest deals financed on StackSource are both growing as our platform matures, and as we continue to offer more financing solutions including PACE, mezzanine debt, preferred equity, and more through a single online financing experience.
Lowest Rate Wins?
All else equal, borrowers would prefer a lower rate on their commercial mortgage.
However, not all else is equal.
Something we haven’t tracked until I ran analysis for this milestone was exactly how often a borrower chooses the lender that offers the lowest rate for their deal on our platform. While there is correlation between offering a lower rate and having an accepted offer, it’s fairly weak correlation, as only…
of borrowers choose the lowest rate.
Technically it’s 50.49% of the time the lender with the lowest rate ends up as the Winning Lender. That means roughly half of the time, borrowers are either optimizing for higher leverage, less recourse, a faster close, or some other factor besides rate. While rate is important, it is not the end-all, be-all for commercial financing. I was personally surprised that the lender with the lowest rate is only selected half the time.
Speaking of interest rates, lenders generally understand what it takes to make themselves competitive in the market, and that means quoting reasonable interest rates and fees. But sometimes, a deal with some unique factors may be priced entirely differently by different types of lenders.
One loan for an industrial park received financing offers from several different lenders in order to refinance a maturing loan, but the spread between the highest interest rate and the lowest rate quotes was…
915 basis points (9.15%)
Largest spread between the highest rate and lowest rate lenders on the same deal
Yes, a bridge lender who offered flexibility, less diligence, and a fast closing timeline quoted 12.99%, and a bank quoted 3.84% for a perm loan. Ultimately, the borrower actually chose the bridge lender to preserve flexibility to sell the property in the short term.
Speed and flexibility often go hand in hand to make deals happen quickly, while other scenarios call for a patient negotiation for the ideal combination of rate, fees, and structure. We looked at both the fastest and slowest loan closings to date, and each of them are a bit surprising.
Fastest time from application to closed & funded.
The fastest time from loan request submission to closing here was just 6 days. An investor in Texas was under contract for a parcel of land North of Houston and had to close quickly. StackSource quickly turned around a quote from a reliable lender that can close at reasonable leverage and terms in a matter of days.
Slowest time from initial application to closed & funded.
On the other end of the spectrum, one client opened up a loan request on the StackSource platform for a mixed use commercial building in Michigan, and didn’t continue the process with us for over two years, before coming back to the original loan request, receiving quotes, and getting funded for a grand total of 1001 days!
Many deals financed through StackSource come to us from various referral sources, including partners that display our commercial mortgage rates for their own clients, investment sales brokers that refer buyers in need of financing, and others.
Referral partners paid
We’ve paid referral fees to over 50 different partners, ranging from one single check of $650, up to more than a dozen deals closed and referral payments totalling hundreds of thousands of dollars.
So far, about 37% of our closed financing deals have been attributed to a referral and paid accordingly.
What the Data Points to Next for StackSource
Growing a business is both art and science. Measuring what has worked well so far helps to hone in on what might happen in the future, but ultimately it’s unknowable. That being said, we like to peek in at our pipeline data and can confidently say that our journey from $1 Billion to $2 Billion in financing arranged will be, well, much, much faster than our long journey so far to our first Billion.
We have three more really big announcements to make before the end of the year, so if you want to keep with us and our mission to modernize commercial real estate financing, please do sign up for our email list below. I promise you’ll get more data that we can derive from our financing marketplace, interesting real estate investing and proptech trends, and be able to stay up to date with the real estate financing market if you do.