In this letter, we shift the focus from a broader discussion of economics and real estate markets, to the specifics of Aloha’s lending business. All lenders have non-performing loans. The processes and protocols employed in working out these loans are an important part of a private lenders’ business, and ultimately translate to the Fund’s bottom line.
The work out process takes significant time and effort. We use a variety of strategies to get our investors the best results, including foreclosure, deed in lieu of foreclosure, loan modifications, payment plans as well as facilitating the sale of loans to other real estate investors with whom we have experience. Aloha’s in-house counsel is able to translate these deals into legal agreements quickly and efficiently. We’ve put together some information to share below.
First is a snapshot of the over $68 million in loans we’ve originated since our inception. Next is a table showing stats on non-performing loans. Loans with payments sixty days late are defined as non-performing. As you can see, we have resolved over $1.3 million of non-performing loans since inception. Notably, these loans were still profitable for the Fund overall, returning 3.60%, but write-downs did produce a lower return in August and September.
The current loans in default which are referenced, are in the final stages of the foreclosure process and should be resolved in 2019. Recently, we’ve had positive developments in this regard. Aloha resolved $1.15 million of non-performing loans in September. We facilitated two loan sales from a struggling borrower, to a borrower with a higher level of experience and resources to execute and exit the projects. We also exited two properties taken back from borrowers via deed in lieu (of foreclosure), which did require write-downs of interest previously earned, but not of principal. These work outs mean that additional capital is now freed up to lend again, thus potentially earning our investors additional interest moving forward.
As always, Aloha’s loans are collateralized by single & multi-family residential real estate, first position liens and personal guarantees by sophisticated real estate investors.
Aloha Fund made money for its investors again this month–bringing us to 44 straight since inception. The same is true of income distributions, investors seeking income have received a distribution every month since January of 2015. Our investors continue to appreciate the consistency and risk-reward profile of the private lending business model.
After consulting with the Fund’s administrator, we’ve added a paragraph under the performance capsule to give more color regarding how the monthly returns are calculated. Current or prospective investors should review this disclosure and please let us know if you have any questions. As has been the case month in and month out for some time, the Fund has plenty of deals. We are actively seeking new investor relationships.
Please reach out with your questions and interest in working with Aloha Capital in this excellent investment.
We greatly appreciate your patronage and trust.