- change ups
The loan arranger: Benchmark Companies 'mitigate risk'
The managing partner of Benchmark Companies said his real estate investment firm is going against the market grain.
While financing for residential property buys has all but vanished from the usual sources, Jason DeMink said his firm is ready to lend to investors interested in buying real estate in the region. And DeMink said Benchmark Companies, which has a reported $35 million in assets under management, has a good reason to lend.
“Fannie (Mae) and Freddie (Mac) fell on their faces and for all those reasons, we do the opposite of what they do. And it’s the best time to do it,” he said.
“We know the geography. We know the market. We know the collateral. We know the borrower. We perform our due diligence because we’re ultimately going to service the deal from beginning to end and we’re responsible to a private investor, with basically a cash investment,” he added.
DeMink said the process Benchmark Companies uses and the firm’s knowledge of the region has kept the company out of the sub-prime market that demolished the housing industry and closed the credit windows at most banks.
“We’ve made double digits since the day we started for our investors. We did it quietly and we did it enough where we didn’t have to raise new funds and reorganize,” he said.
An audit, which DeMink said was conducted by Plante & Moran, showed the annualized rate of return on the company’s matured investments was 11.59 percent from 2001 through 2008.
DeMink said Benchmark Companies has taken private money and matched those dollars with investments for the past 22 years. But he said the firm has grown so much in recent years that it has reorganized into a fund that will manage real estate investments in a pool, with most invested into residential properties.
“That is the culmination of the last 18 months for the legal work to put together a new investment pool for West Michigan investors for West Michigan real estate investments,” he said, while adding the new fund has a cap of $100 million.
DeMink said the firm’s investments are real-estate backed and consist of the notes and the contracts tied to property transactions. With housing prices down and homes going for foreclosure rates, bargains are available. Interested investors, though, can’t find the financing from the usual lending sources and that’s where Benchmark Companies plans to step in.
“So privately we’ll act as an equity partner and fund the deal for them at a higher than market rate, obviously, because we’re in a position where we’re going to mitigate risk, but there’s an opportunity for private growth there, and manage that investment,” he said.
“We don’t necessarily buy or sell, broker or manage real estate. We’re a private lender, in effect, and people will come in and act as a bank. We’ll create investments with borrowers that would otherwise have gone to the bank, but the current credit crunch has pushed them out. We facilitate investments through private funds,” he said.
DeMink told the Business Journal that Benchmark Companies has always had a quiet niche-type of relationship with residential investors who purchase homes and then flip or rent the houses. He said the firm’s typical customer is a $500,000 to $2 million investor.
Since banks have pulled back on their mortgage businesses, DeMink said more business has been pushed to his firm.
“Now that we have three or four times the customer load, it’s time to go raise some more funds and get back into real estate type investments,” he said.
“We’ve always had a steady stream of business. But now it’s the perfect storm and a great opportunity to buy those assets because they’re just sitting out there.”