Reigo Investments, a global real estate tech company, announced closing a $100 million securitization of residential bridge loans led by Cantor Fitzgerald and closing a $13 million Series A led by Caesarea Medical Inc., according to a press release shared with FinLedger.
The transaction follows the company’s previous $100 million securitization in July 2021 and opens up the volume and size of financing Reigo can provide to consumers.
The company also noted this is the first ever securitization in the short-term real estate debt market to be included as part of its investment policy for its machine-learning-based mechanism. This means that every loan funded by the securitization must pass the company’s own AI-based “Reigo Score” criteria, which places importance on reducing default rates and optimizing risk-adjusted return for investors.
“It shows real confidence from the market,” Reigo Cofounder and CEO Yariv Omer told FinLedger. “With this 100 million, we can increase the loan amount and the portfolio diversification. We were focused on small-medium sized loans, usually up to one million dollar deals. Now, we are able to do two to ten million dollar deals.”
“It allows us to do bigger deals in additional sectors. It’s part of the vision of growing to additional verticals that can be enhanced by our technology. I think the second thing that is interesting, is it will allow us to grow and hopefully prove the point by allowing borrowers to build homes quicker,” Omer said, noting the housing shortage of 5.24 million homes in the U.S.
The company said the securitization features a 24-month revolving period, after which the transaction will begin to amortize. It also says the pool of loans is business purpose loans, 100% senior positions with a six- to 24-month term, according to the release.
Omer noted that the company initially focused on short-term bridge loans, as a starting point for a bigger goal: to disrupt how credit decisions are being done in the real estate debt world.
He says that while you can present new or additional scientific angles that will help analysts, not replace them, it is harder to prove to investors that your new way is better than traditional methods. As a result, Reigo focused on short-term, approximately year-long loans so it would be faster to prove its data thesis actually works.
“When you build algorithms, you prove them based on historical track record, and to really invest in the real financial investment world you need a proven track record. We needed something that finished fast in a way,” he said. “Up to date over 900 loans have been funded using AI-based technology with great performance.”
Omer also noted that the company wanted, and succeeded to prove that its model could work for riskier loans. Bridge loans, also called “fix-and-flip loans,” have a rehab and construction component, making them riskier than plain mortgages.
“The fix-and-flip market has more defaults and risk than traditional mortgages, so the need for better risk models is higher. I am happy we were able to prove that point to the capital markets,” he explained.
Reigo’s $13M Series A
In addition to doubling its securitization, Reigo also announced closing a $13 million Series A led by Caesarea Medical Inc., a strategic fintech, insurance and private equity investor.
The company plans to use the funding to continue its U.S. expansion plans and further research and development investment in its platform.
“We have a very experienced data science team, so we want to extend that in order to expand traditional verticals and explore investing in rental homes, like Airbnb investments. Maybe regular mortgages, or low credit and other bigger multifamily or land deals,” Omer said.
“It will allow us both to expand the risk research and development efforts on one hand, and secondly operations to grow the business. We envision growing the business to become one of the market leaders, and we need capital to enable this growth. I’m happy to finalize it,” he said.