UPCLOSE & PERSONAL
ONE-TO-ONE
ANewAvenue for Real Estate Loan Investing BREW JOHNSON AND BRETT CROSBY HAVE PEERSTREET ON A ONE-WAY COURSE: FORWARD.
in the market. We have other investors who were also on the right side of the previous cycles, including Michael Burry, who is the main focus of the book, “The Big Short,” who’s played by Christian Bale in the recent movie. We’ve structured this business inten- tionally from a more conservative place, meaning that we have more conservative underwriting guidelines than generally exist out there in this asset class. Your team members have impressive backgrounds—MIT computer science, NYU law, MBAs, and Wall Street. How has this diverse experience enabled you to create a successful company? BREW JOHNSON We’ve been able to attract an incredible amount of talent in technology, real estate, finance and law, which is exciting because they’re very smart, capable people who are trying to build something that is, collectively,
bigger than the individuals. I was a real estate attorney back in the previous cycle and understood the issues with the mortgage industry in the securi- tization market that led to the downfall. Then I got in the tech world and built a tech platform to Expedia. Brett’s back- ground is as founder of Google Analyt- ics, the largest Web analytics platform on earth. We know building a successful technology platform is all about creating value for others. BRETT CROSBY It’s humbling to be around these people who have decided to join us in this crazy journey. And it makes coming to work just that much better because they are self-starters, they’re motivated, they’re athletes and they’re professionals—it’s truly inspiring. How would you explain the advantage of your technology platform to a non-techie?
BRETT CROSBY We try to cast as wide a funnel as possible and then curate from there what we think are the highest quality deals and then bring only those to market. Also, we’ve established a relatively conservative credit box, meaning we’re very selective about the deals that come through. We’ve inten- tionally tried to minimize exposure to riskier deals. And, as anyone who’s trying to be responsible with introducing a new asset class should do, we’ve modeled out risk and looked at worst-case scenarios until we feel very comfortable about how those models turn out in regard to the principle of being safe. How will your team handle a down market? BREW JOHNSON We have a lot of people involved with this business who have gone through cycles, and at least on the last cycle, were early to identify problems
by Susan Thomas Springer
I
n only its first few years, Peer- Street has demonstrated that
directly before. For us, it’s really import- ant to open up things and not have it be dominated by institutions. Someday, we’d like any investor to be able to access them, but regulatory-wise and legally, we’re only allowed credit investors to invest, so we’re limited for individuals. BREW JOHNSON It ranges. We have everything from hedge fund managers to very successful real estate investors, private equity investors and tech people. It’s a fairly broad investor base, but generally professionals. Who are your customers?
BRETT CROSBY One of the things we’ve done that’s new and innovative is allowed people to diversify—across loans, lenders and geographies—in ways that no one’s been able to do before.
its combination of real estate exper- tise, big data and tech leadership can create an innovative opportunity for investors. This online real estate marketplace, based in Manhattan Beach, California, has funded more than $75 million in loan volume and exceeded $25 million returned to investors. CEO Brew Johnson and COO Brett Crosby founded PeerStreet in 2013 to give investors easy access to high-yielding loans collateralized with real estate. Think Realty Magazine recently named the company “Innovator of the
How do you minimize risk and maximize return?
BREW JOHNSON Debt is the safest part of real estate, and we think for an online platform it’s by far the best place for the vast majority of investors to be. We want to focus on the best risk-adjusted returns for investors.
BREW JOHNSON We provide tools to lenders who are making loans to borrowers, which make them more efficient and better underwrit- ers and better lenders. Then we internally use tools to analyze loans in a unique way, so you have a combination of a local lender making loans in its geography. PeerStreet provides data analytics—I mean extreme data. There’s a huge amount of data science behind the scenes that goes into analyzing markets where properties are located, what the trend is in those mar- kets, and then what the worst- case scenario is if we repeat it in a financial crisis. From the investors’ side of the platform, the real efficien- cy of the technology is being able to log into a platform as if you’re trading stocks, like
ABOUT PEERSTREET Founded by real estate attorney Brew Johnson and former Google executive Brett Crosby, PeerStreet has created an intuitive, secure interface that allows investors a way to easily access high-yield real estate loans that were historically very difficult to obtain.
Year/Lending” for 2016. Here Johnson and Crosby share the unique approach they and their multidisciplinary team have taken to build their innovative company. As told to Susan Thomas Springer, edited for brevity. THINK REALTY MAGAZINE How are you delivering on your pledge to provide “an innovative way for investors to access real estate loans”? BREW JOHNSON The asset class we’re dealing in is private money, nonbank real estate loans. Really, nobody’s been able to access them
PHONE: 844-722-8898
BREW JOHNSON CEO & Co-Founder
WEB: www.PeerStreet.com
BRETT CROSBY COO & Co-Founder
86 | think realty magazine september :: october 2016
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