In a year when traditional lenders continued to retreat from commercial real estate, Nectar's strategy of providing flexible capital to experienced operators proved more valuable than ever. While others saw challenges, we saw—and seized—opportunities to strengthen our platform and enhance our ability to generate consistent returns for you. The flight of traditional capital from the market allowed us to be increasingly selective, focusing on higher-quality borrowers while maintaining our commitment to prudent underwriting and risk management.
We've used this market environment to strengthen our foundation for protecting and growing your capital. Our numbers speak for themselves: Our portfolio LTV is 60%, DSCR is 1.38, and the average AUM of our borrowers this year was $75m. These numbers offer a great deal of security in virtually any market condition. The metrics represent our commitment to our core thesis of focusing on experienced operators with low leverage, cash-flowing, fully stabilized assets.
Returns remained strong and steady this year. Since inception, our fund investors have continued to earn steady 12% returns, while our broader investment products maintained average target returns of 15%. We achieved these results not by taking more significant risks but by improving our skills in identifying and funding experienced operators with stable, cash-flowing assets. In a year when many real estate investments faced significant headwinds, the consistency of our returns demonstrates the resilience of our investment strategy.
A Stronger Tech Focus
We've also invested heavily in technology that directly benefits you. Our new investor platform gives you clear visibility into your investments and easy access to new opportunities. You will soon be able to invest and/or add to your positions at your convenience. Check your inbox for a personal invitation to log in to your dashboard in the coming weeks. Also, our new proprietary targeting system could reduce our originations' marketing costs by 80% while improving our ability to identify quality borrowers. These efficiency gains allow us to keep more of what we earn working for you rather than spend on overhead.
Increased Investor Protection
Your investment helped us build stronger protections this year. While our portfolio has performed exceptionally well overall, every lending business faces occasional challenges. In 2023, two defaults allowed us to demonstrate our ability to protect investor capital. Through decisive legal action, we secured favorable outcomes in both situations. In our first default, a 52-property single-family rental portfolio near Marshal University, we secured liens on all assets and began an orderly recovery process. Already, we've recovered 10% of the outstanding principal through asset sales, with additional recoveries expected in 2025 as more properties are sold. In our second default, we quickly took legal action and settled with the borrower, who has consistently met their revised payment obligations since July. These experiences have strengthened our platform significantly. We've enhanced our underwriting criteria, improved our servicing processes, and validated our security structures - all of which better protect your capital going forward.
More Media Mentions Than Ever
The market has noticed our success. Nectar has been featured in over 75 mainstream and industry publications, including Fox and NPR. This visibility isn't just about recognition—it's expanding our network of high-quality borrowers and bringing us better investment opportunities for your capital. When leading platforms like Crexi and Smart Humans feature our insights on real estate finance, it reinforces our position as a trusted leader. It helps attract the kind of institutional-quality borrowers who can support stable, attractive returns for you.
What This Means for Your Investment in 2025
The commercial real estate market faces continuing challenges, with $2.81 trillion in mortgages maturing between now and 2028 in a capital-scarce, high-interest-rate environment. For many investors, this spells trouble as there will be distress in the market. For Nectar investors, it spells opportunity. Here's why:
First, as traditional lenders pull back, quality borrowers who typically rely on bank financing increasingly turn to alternative capital sources like Nectar. This gives us remarkable selectivity - we can choose the best opportunities that match our core thesis of low-leverage, cash-flowing, stabilized assets. Our nationwide network allows us to build a diverse portfolio across geography and property types, providing natural protection against market-specific risks. Our enhanced technology platform lets us evaluate deals quickly while maintaining strict underwriting standards. The result is a steady pipeline of high-quality opportunities that meet our rigorous criteria and provide the kind of institutional-grade diversification that's increasingly hard to find in today's market.
For those of you who have been with us, thank you for your continued trust. Your investment has helped us build something special—a platform that generates consistent returns by funding quality real estate operators who own cash-flowing commercial real estate. For those considering an investment with Nectar, we invite you to join us as we grow and evolve.
The achievements of 2024 aren't just milestones - they're building blocks for generating even more substantial risk-adjusted returns for our investors in the years ahead. We look forward to continuing this journey with you.
Best regards,
Derrick Barker
CEO, Nectar
