Underwriting
How we think about risk, including when things go wrong.
Every loan starts with the property, the borrower’s equity, the structure and the exit. This page sets out how we weigh those, what we watch after closing, and what happens when a loan doesn’t perform.
The loan should make sense before the return does.
Every loan is originated, underwritten and serviced by Alliance Portfolio. Five questions come before any discussion of yield, whichever route an investor takes into it.
Is the property appropriately valued?
What the property is worth today, in its own market, rather than what it might be worth later.
How much borrower equity is in the transaction?
How much of the borrower’s own capital stands beneath the loan, and what else is secured against the property.
Where does the loan sit in the capital structure?
The recorded position, and what obligations would stand ahead of it if the plan changes.
Is the exit realistic?
How the loan is repaid: a sale, a refinance or a completed project, evaluated before capital goes out.
What happens if the original plan takes longer?
What recovery could look like, and whether we know the asset and market well enough to manage that outcome.
What sits behind every loan.
The same diligence protects the borrower and the investor. Investors in an individual trust deed see this material before committing; Fund investors see the offering documents that govern the portfolio.
Independent appraisal
What the property is worth today, from a third party, rather than what the borrower says it is worth.
Preliminary title report
What is recorded against the property, so the position the loan will hold is known before it is funded.
The borrower package
Who is borrowing, what the loan must accomplish and how it will be repaid.
The note and deed of trust
What is agreed is what is recorded. The security is real property and the remedy is against that property.
What can go wrong, and what stands against it.
Private real estate lending carries risk, including the risk of losing capital. We don’t present these as solved. What follows is what can happen and what we do about it.
- A borrower stops paying
- We service our own loans, so we see a problem early and deal with the borrower directly. Where a loan has to be enforced, the security is real property and the remedy is against that property.
- Property values move
- Loans are written against what a property is worth today, well below that value, so borrower equity absorbs movement before an investor’s capital is exposed.
- A loan runs past its term
- Every loan is written to a defined exit, and an extension is considered on its own merits rather than granted to avoid a problem.
- Capital is not liquid
- This is an investment in loans held to their terms, not a traded security. The conditions that apply to withdrawal are set out in the offering documents and should be understood before subscribing.
- Everything is in California
- We lend where we have judgment, which concentrates the portfolio in coastal California and its property markets. The trade-off is deliberate: local knowledge in exchange for geographic concentration.
Private real estate lending involves risk, including the risk of loss of capital. Yields and returns are not guaranteed and past performance does not indicate future results. Nothing on this page is an offer to sell or a solicitation of an offer to buy any security. Any offer is made only through the current offering documents, which govern and which should be read in full.