Investor Insights January 2021

Business, Investor Insights — February 1, 2021

Reflecting on 2020 – Focusing on 2021. Monitoring Trends, Expanding Breadth.

We wish you and yours a very Happy New Year. As we start 2021 we find ourselves reflecting on the truly unique circumstances we faced as a business and we all faced as individuals in 2020. We entered 2020 with a significant volume of loans in the hospitality asset class, as this niche has been a core focus of ours for many years. During the initial stages of the pandemic, we focused our team on the management of our existing portfolio, working with our borrowing customers to ensure they had the financial resources necessary to manage through the ensuing business slowdown from the pandemic. We found that a significant number of our borrowers were well equipped to continue to service their debts in spite of the significant declines in business, and we made payment concessions to certain other borrowers that we expected to be the most impacted by the slowdown in travel.

We had hoped a short-term solution would be sufficient to address what we believed would be a severe, but short, disruption to the hospitality and travel industry as a whole. The impact of the pandemic has continued far longer than we anticipated, and while the hospitality industry had recovered meaningfully from the low point in the spring of 2020, the industry ended the year at revenue levels 35% below those seen pre-pandemic. Our portfolio continues to outperform the industry as a whole, with 65% of our operating hotel loans above the industry average year-over-year revenue change, with half of those reporting periodic revenue increases year over year. As a result, over 90% of our borrowers were making their full scheduled monthly payment by the end of the fourth quarter of 2020. The remaining borrowers, with loan balances totaling approximately $87 million, remain on varying degrees of payment deferrals based on their individual circumstances. This includes $53 million on full temporary payment deferral, $23 million on partial payment deferrals, and an $11 million delinquent loan which we expect to pay off during the first quarter of 2021.

We focused heavily on portfolio management and reducing our overall exposure to hospitality assets (at their respective par values) during the year, and we expect total hospitality exposure to decline by $90 million between the fourth quarter of 2020 and the second quarter of 2021. Our originations team was also successful in originating $226 million in new loans during the year, with a large focus on our renewables business. Finally, we announced last month that we acquired a controlling interest in Extensia Financial, a credit union service organization, or CUSO. In addition to increasing our AUM to $1.3 billion, this strategic acquisition will allow us to offer a more comprehensive product set to our borrowers, providing more opportunities for investment for our valued institutional investment partners.

As we look to 2021 there remains considerable uncertainty in the commercial real estate markets as the long-term effects of COVID-19 on our economy are unclear. The pandemic has had very limited impact on our renewable energy finance business, so we expect this segment to be the focus for new lending activity in 2021. We continue to be very active in financing the development of utility-scale solar farms, but will also fund multiple biogas production facilities in 2021 that were approved and closed in 2020. We expect our business around non-solar renewable energy lending to grow in 2021.

The acquisition of Extensia Financial was an important step in our transition from a single vertical provider to a diversified group of companies. We have another acquisition in the pipeline for 2021 and are in the process of developing important technology solutions which will expand the breadth of lending products we bring to market and provide access to these investments to a larger group of investor segments.

We continue to monitor national and local trends and the operating performance of our portfolio as we progress through this unprecedented recovery. We’ll continue to provide updates via email, and you can find additional material on our website at Should you have any questions in the meantime, please don’t hesitate to reach out to us or a member of our team.


Sundip Patel
CEO and Co-CIO
Michael Sheneman
CFO and Co-CIO