Partner Notes – Copy

As Groundfloor continues to improve and develop our roster of investment products, we’re excited to introduce the latest investment opportunity available to accredited investors: Partner Notes.

What are Partner Notes?

Similar to longer-term Groundfloor Notes, Partner Notes offer monthly interest income with deferred principal repayment upon maturity at the end of their terms. While Groundfloor Notes are issued and secured directly by Groundfloor and its assets, Partner Notes are issued by Groundfloor, but are secured by the assets of Groundfloor’s trusted partners. While we fully vet these trusted partners, at no point do they have access to any investor-related information.

Under the hood, each Partner Note is issued against a corresponding loan made to a third-party partner by Groundfloor. The duration and payment terms of the underlying loan mirror those of its Partner Note, and Groundfloor passes interest and principal payments to you, the Partner Note investors. This structure is similar to that of LROs: Groundfloor issues LROs against loans made to real estate developers by Groundfloor and passes deferred interest and principal payments to LRO investors.

How are Partner Notes different from Groundfloor Notes?

Partner Notes can be viewed as a hybrid between Groundfloor Notes and LROs. Like 12 & 24-month Groundfloor Notes, Partner Notes offer monthly interest income, and like LROs, Partner Notes are backed by loans made to third parties.

Because Partner Notes are issued against loans, they are structured as Payment Dependent Notes — interest and principal payments on Partner Notes are funded by loan interest and principal payments made to Groundfloor by their respective Partners. Relying on the payment of third parties, Partner Notes bring a unique risk profile compared to Groundfloor Notes and LROs. While the reliance of a third party to make loan payments does not inherently increase the investment risk of Partner Notes compared to Groundfloor Notes, we have structured Partner Notes to offer market-competitive rates as some of the highest-yielding Notes currently available on Groundfloor.

How is my investment protected for Partner Notes?

Investments into Partner Notes are backed by real estate assets of Groundfloor Partners. By design, all Partner Notes must be over-collateralized, meaning for every dollar invested into a Partner Note, there is more than a dollar’s worth of assets securing the investment either through liens, direct title ownership, or equity ownership. Over-collateralization provides a layer of protection against potential devaluation of assets that secure Partner Notes, and in the event of default, allows Groundfloor to liquidate secured assets to recover not only principal but also accrued interest.

How do I invest in Partner Notes?

Partner Notes are available only to accredited investors within the “Notes” tab on the Groundfloor investment page.

How are Partner Notes different between Partners?

The specific partner will be identified and called out within the Note name. The unique aspect of the Partner and the underlying collateral will be described on the Detail page of the respective Partner Note.

How are Partners vetted through due diligence?

Each Partner goes through a detailed due diligence process. We evaluate the product, collateral, market, company performance and fundraising history. These factors inform the Investment Committee, who approves the Partner for further product exploration.

When will I receive the Monthly Interest?

Interest will be received at the beginning of each month similar to how the current monthly payment process occurs. Sufficient reserves will be required to prevent collection delays and any default events will be communicated promptly.

Can Partner Notes go into Default?

Yes, like LROs, Partner Notes may go into default depending on the performance of the Partner and their ability to meet monthly interest requirements and to repay principal a maturity. The protections built into each Partner Note and its underlying loan aim to afford Groundfloor the means to recover invested capital in the event of default.

How frequently will Partner Notes be offered?

Offerings will depend on interest from investors and capital needs of our Partners. We are currently planning to run this program for three months to monitor traction and interest. If we meet our Partner’s capital requirements, we will need to then find new Partners to bring more opportunities to the platform.

Why is Groundfloor no longer offering a 24-month Note?

The 24-month Groundfloor Note was launched in Q2 2022 and was met with great demand from Groundfloor investors alongside Groundfloor Notes of various durations.

With strong continued demand for Groundfloor Notes of shorter durations, and as we optimize our working capital management practices, Groundfloor currently does not require 24-month Notes offered at market-competitive rates to originate new loans and fund LROs.

Have more questions? Contact us at [email protected].