Patch of Land's Secured Notes Offering Structure for Secured Notes

Patch of Land's Offering Structure 2.0

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While the platform will still offer investors borrower payment dependent notes (which means 1099s), we’ve taken steps to increase investor confidence and security in our new offering structure. These protections will be available for all projects offered after Monday, June 1, 2015 and makes POL the only provider of fractionalized notes truly secured by the underlying real estate asset.

So, what's new? Here are the main highlights:

  • Bankruptcy-Remote Design: All new offerings will be issued from one or more special purpose entities (SPE) designed to be bankruptcy remote. SPEs are business entities formed in a manner designed to minimize the risk of becoming a debtor in a bankruptcy case. This means that if something happens to Patch of Land, Inc., the SPE is designed so that its obligations are secure even in the event of the bankruptcy of Patch of Land, Inc. Except in certain cases, all borrower notes and investor notes will be held by one SPE.

  • Indenture Trustee: We’ve signed an agreement with an indenture trustee that steps into our shoes should an event of default ever occur. They will make distributions to investors should we ever file for bankruptcy, dissolve, or have some other event of default.

  • Secured Investment: All of our offerings will now be directly secured as to a pledge of collateral only as to the underlying borrower note, mortgage and related cash flows to the trustee. To be clear, the collateral is not pledged directly to an investor as a holder of the borrower payment dependent note, but is instead pledged to an indenture trustee under which investors benefit as a note holder.

  • Perfection of Security Interest: In order to perfect our investors’ security interest and ensure the priority of that perfected security interest, the secured party must take possession of the promissory note. Therefore, a trustee will take and maintain possession of the borrower note.

  • Public Notice: And lastly, to perfect the security interest and put third parties on notice, we have filed a UCC-1 that puts any potential third party creditors on notice that the underlying borrower loans have been pledged to the trustee for the benefit of investors.

Additional Clarifications

Aside from the changes mentioned above we have clarified a few other points about the offering:

  • Interest Rates: Are calculated on a simple interest basis based on 360 days.

  • Fees: More clarification on any fees that may be charged to the underlying borrower or investor.

  • Disbursements: In order for us to provide the best service and accurate numbers, we disburse interest payments on the 15th day of each month.

Previous Offerings to Reap Benefits of New Offering Structure

All our previously funded borrower loans, as well as the investor notes associated with each of those loans, have been transferred into the SPE mentioned above. This allows investors to enjoy the benefits of our new offering structure even for investments made prior to our new offering structure. Look for a notice under your “My Accounts” tab in coming weeks!

All in all, we believe this new product structure will increase the security of our investors’ investments and their confidence in investing on our platform. We’d love to hear your thoughts and answer any questions you might have.


Download Our Sample Offering Documents

As part of our philosophy on transparency, we are the first real estate crowdfunding portal to release a template of our new offering documents publicly, so that investors may take time to understand the nature of their investment and consult their financial and legal counsel. Please remember that these documents are only a sample template and that we may change and update the document from time to time in our discretion. Investors are always encouraged to read the full documentation on their particular investment prior to investing.

All in all, we believe this new product structure will increase the security of our investors’ investments and their confidence in investing on our platform. We’d love to hear your thoughts and answer any questions you might have by contacting our Customer Service and Investor Representative Team at investors@patchofland.com or by calling 888-959-1465 ext. 2. You can also be heard through our new Patch of Land Ideas Portal where you can let us know how we can build a better Patch of Land for you. As always, we appreciate your continued business and look forward to hearing from you.

Download Sample offering docs below

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