8% - 8% Annually
Earn Preferred Returns on Secure Real Estate Loans by Investing with Walnut Street Finance
Building on 20 years of real estate building and development experience, Walnut Street is now offering investment access to first lien, secured real estate loans. These loans offer capital preservation and an eight percent preferred returned to investors. Leaning on years of underwriting and valuation experience, Walnut Street utilizes a comprehensive underwriting process that includes both the underlying real estate asset and the borrower. We are uniquely positioned — should a borrower default on a loan with us — to own and manage the property and finish construction in‐house. The result is an opportunity for investors to protect their capital and receive attractive, risk-adjusted returns.
- Accredited Investors Only
- Total Offering: Up to $30,000,000
- Minimum Investments: $25,000
- Five Year Fund: January 2017 – 2022
- Yield: 8% Annual Return, Monthly Payments
- Property Location: DC, DE, MD, VA
Walnut Street Background
Walnut Street was founded in 1998 by Robert R. Montagne, Jr. as a private real estate development company focused on well‐located, infill sites in and around Washington, DC. Walnut Street’s business model included acquiring, zoning, and building residential and commercial projects in “A” locations. Mr. Montagne is a real estate entrepreneur with three decades of experience in residential and commercial property development, finance, and sales. Mr. Montagne has consistently delivered high quality returns to partners and investors.
Walnut Street approaches each loan and borrower as we would a partner, first identifying capital needs and then delivering the right solution. We undertake underwriting of hand-selected loans with a combination of in-house analysis, on-site review, and third-party consultants. We underwrite as if we were the owner, and must be confident in a profitable exit. We lend to borrowers with a solid acquisition and exit plan and who pass our review of credit, experience, and overall “big picture.”
Walnut Street Finance Fund II is led by Mr. Montagne, who will act as the owner and operator of Walnut Street Manager, LLC, the Manager of the Fund. The Fund’s investment goal is to provide attractive, risk-adjusted current returns secured by real estate through the origination and purchase of mortgage loans. The Fund focuses on secured loans relating to short-term renovations, acquisition, construction, development, and bridge financing for non-owner occupied residential and commercial properties.
The short term nature of these mortgage loans limits the Fund’s exposure to fluctuations in real estate values. Additionally, the mortgage loans are first‐lien priority mortgages, all backed by real property and typically protected further against loss with significant equity cushions. The Manager maintains full transparency into each property and borrower, with the ability to inspect the property and fully scrutinize the borrower’s credit profile prior to origination or purchase of the Mortgage Loan.
The Fund’s investment philosophy is built upon the following principles:
- Capital Preservation: First-‐lien position Mortgage Loans not to exceed 75% Loan-‐to-‐Value (LTV) after improvements.
- Current Yield:
- Monthly interest payments to Fund Members;
- Eight percent annual return to Fund Members; and
- Typical mortgage loan maturities and repayments within 6‐12 months provide relatively quick return of principal and allow the Fund to frequently turn assets decreasing its exposure to the market.
- Diversification of Risk: The Manager intends to originate and purchase mortgage loans for the Fund collateralized by various property types in various locations throughout the Washington metropolitan region. This strategy ensures that the Fund’s risk will be diversified across several individual properties, geographic locations, and borrower credit profiles.
Investing Through Retirement Accounts
Accredited investors are permitted to invest in the Fund through self-‐directed individual retirement accounts, 401(k) plans, Keogh plans, and other qualified retirement plans, which may be eligible for tax‐deferred or tax free growth, asset protection, and yearly tax deductions, where appropriate.
Walnut Street Finance has established a preferred relationship with Mainstar Trust, a self-directed retirement custodian with over 30 years of experience as a self-directed retirement custodian.
Summary of Key Terms of the Fund Offering
Walnut Street Finance Fund II, LLC, a Delaware limited liability company (the “Fund”), was formed primarily to originate, purchase, or otherwise acquire short-‐term loans secured by first-‐position mortgages or deeds of trust on non-‐owner occupied residential, multi-‐family, and other small commercial and industrial real property located in Virginia, District of Columbia, Maryland, and Delaware (the “Property States”).
The Fund is seeking capital commitments from “Accredited Investors,” in amounts of $25,000 per unit.
The Fund will be funded with a minimum of $1,000,000 and a maximum of $30,000,000 through this Offering. Mr. Montagne has made a commitment to contribute a minimum of approximately $500,000 to the Fund by contributing cash and existing loans.
The Manager and Fund Administrator
The manager of the Fund is Walnut Street Manager, LLC, a Delaware limited liability company, with offices located at 4021 University Drive, Suite 200, Fairfax, VA 22030 (the “Manager”).
Originator & Servicer
Originators or the Fund will originate, and the Manager will have primary responsibility for servicing, the mortgage loans that the Fund originates or acquires.
The Manager will bear the cost of all operating expenses of the Fund.
Compensation to Manager
The Manager will be entitled to the net profits above the preferred return of 8% per annum distributed to Members on their capital investments. Notably, the Manager will not receive fees for managing the Fund.
Membership Interests are exclusively offered to Accredited Investors.
Mortgage Loans in the Fund will be secured primarily by first-‐lien mortgages or deeds of trust on real or personal property.
Leveraging the Portfolio
The Fund may borrow money from third-‐party lenders to leverage the Mortgage Loans originated or purchased by the Fund; provided, however, that the ratio of debt to total Capital Investments in the Fund shall not exceed 35% at any given time.
Types of Property Securing Loans
Non-Owner Occupied Residential, Commercial and Other Property
Maximum Loan-to-Value Ratios
- Loan to Value (“as-is”): 85% LTV
- Loan to Value (“as improved”): 75% LTV
Distribution of Net Profits
Net Profits of the Fund shall be distributed monthly, first to the Members representing a preferred return of 8% per annum of their Capital Investment, and remainder to the Manager.
Return of Capital
The Manager reserves the right to return part or all of the Member’s capital investment to the Member in the Manager’s sole discretion.
Members may request withdrawal at any time with at least nine months written notice.
Life of Fund
The Fund’s substantive operations will terminate on the date that is the 5th anniversary after the Fund’s initial loan funding.