Toorak Capital Partners
A Responsibility for Positive Impact
By Carole VanSickle Ellis
When John Beacham, CEO of Toorak Capital Partners, talks about the company he founded in 2016, he makes particular note of the reach of his platform — and the unusual and outsized impact of a company about which most investors know nearly nothing.
“It’s really interesting because most real estate investors have never heard of Toorak, but ultimately most of them have been financed by Toorak,” Beacham said. “We are not a retail presence but instead partner with lenders to provide capital for their loans. We are probably the most impactful company in the industry that people have never heard of.”
Beacham recalled the moment he realized there was a need for Toorak, which is officially designated an “integrated correspondent lending platform,” to enable real estate investors and real estate lenders to access institutional capital.
“Seven years ago, things were not standardized in this aspect of lending,” Beacham said. “Lenders in different markets had no standardized types of loans, no standardized types of credit guidelines, no standardized appraisal process, and no standardized loan documentation. Literally, every facet of every loan could be different lender by lender and market by market. It prevented access to institutional capital, and it made it hard for lenders to focus on making good loans because they had to worry so much about the capital side of things.”
Beacham, already a veteran in the institutional capital sector, set a goal to find “the best lenders around the country in every market.” Then, via his new company, Toorak, he established a clear set of guidelines and credit criteria for loan purchases. This enabled lenders working with Toorak to know, in advance, whether loans they were making would qualify for purchase by Beacham’s new company.
“It was a winning combination,” Beacham said proudly. “We have partnered with over 100 lenders and funded in excess of $8.5 billion worth of loans employing that original, basic model. It has changed the whole market.”
Managing Risks & Maximizing Capital in Any Environment
Toorak has made a significant impact in the lending industry in part because of the company’s dedication to analyzing and minimizing risks throughout the loan acquisition process. With more than $3 billion in assets under management at time of publication, the ability to accurately identify and evaluate risk in real time is crucial.
Ketan Parekh, Toorak’s managing director and head of U.S. lender relations and capital markets, describes his job as a combination of risk analysis and mitigation and customer service. The key to Toorak’s wildly successful relationships with lenders, he says, is the company’s dedication to transparency.
“We are determined to always be fully transparent about what we see as far as future changes in the market and how that will affect our ‘inflows,’ loans that we are bringing in,” Parekh explained. “Our top priority is making sure those loans make sense and will not default; we have a pretty wide credit box, but the loans must fit within it.”
Parekh credits Toorak’s customized customer portal, Toorak Connect, for helping bring the whole process together for the company’s clients. The Toorak Connect portal is a proprietary platform that contains information about guidelines and pricing as well as providing clients with immediate feedback when they upload information to the system.
“It helps our clients quickly and accurately identify what is important and what is not,” said Parekh. “This is obviously important to our lenders.”
Parekh also spends a great deal of time managing risk on loans, which is a team effort at Toorak. “We have a loan acquisition team that goes through every single loan and compares the appraisal to the actual value of the property. We have an evaluation group focused on nothing but property values. We have dedicated valuation specialists with more than 25 years’ experience as licensed appraisers to review loan acquisitions. We are all part of a team,” he said. That team also evaluates the expertise and experience of the lenders who want to take out loans to make sure that their experience lines up with the loans they are proposing.
“If a lender is focused in New York and then wanted to operate in Texas or Florida, we would screen very diligently because those states have very different permit and approval processes,” he explained. “Ultimately, I am always here to help our lenders move their paper and understand the risks from both sides of the equation.”
A Team with a Long Track Record of Consistency & Partnership
When Beacham founded Toorak, he did so with an eye toward improving the efficiency of the lending market and expanding available capital to real estate lenders. Frank Shiau, Toorak’s head of trading, takes particular pride in the company’s ongoing dedication to working with clients to create a lasting partnership that can stand the test of time.
“Our ability to be nimble and navigate markets as they change is something I am very proud of,” said Shiau, citing Toorak’s recent adjustments during the COVID-19 pandemic as one instance in which the company had to carefully adjust how it evaluated markets.
“There were ultimately a lot of opportunities for people in our space, but you have to be very careful about how much you are paying for assets so you are not overextended.” He added, “We prioritize keeping things stable even though we have also recently had some record months for acquisitions.”
Shiau emphasized the importance of partnership with clients at Toorak, observing that the company values sustainability and consistency within its own customer base as well as in terms of company performance. “We are an ongoing business,” he said. “We are not looking for one trade from you; we are looking to build a partnership. We are in this for the long haul.”
Beacham agreed, noting Toorak’s product mix is designed to address needs across the entire private lending spectrum. “We want our lenders to be able to offer multiple products to their customers and, ultimately, have the partnership, financing, and funds to make those deals happen,” he said. “We grow and expand to fill lenders’ needs just as lenders work to open up new products that enable their customers to grow and meet bigger and bigger goals.”
At present, Toorak offers a product suite that includes rehab and non-rehab bridge loans, ground-up construction loans, intermediate term loans of one or two years, and long-term rental loans.
“We listened to our lending partners about the needs in the market, then went out and developed ways to use the capital market, securitize it, and obtain financing so that we can provide those products to our lending base,” Beacham said proudly. “We have played a crucial role in making more capital available to lenders and we have played a critical role in using capital markets and Wall Street to bring in a large amount of quality funding that has significantly improved the terms of loans that are available to investors.”
Maximizing Social Impact
Toorak considers its purpose to be far greater than simply the acquisition of loans. Although the company does not originate loans nor lend directly to real estate investors, its partnership with lenders around the country has direct, real impact on the state of housing across America both in terms of the creation of new housing inventory and the renovation and rehabilitation of existing housing stock.
“To date, we have funded projects that we expect to provide renovated and stabilized housing units to approximately 30,000 families, and more than half of those units have already been completed,” Beacham said. “We have tripled lending volume in this industry because we help lenders focus on making loans rather than selling them. That drives interest rates down compared to what they would be otherwise, creates more competition and, by extension, more attractive terms for borrowers, and enables more investors to borrow more money for more types of real estate investments.”
Single-family rentals are one popular investment that appeal to families seeking affordable housing. Toorak uses DSCR (debt service coverage ratio) when evaluating loans in this unique sector of the investment market in order to better predict loan performance. Parekh, who came on board with the company in 2020 to help spearhead Toorak’s first DSCR securitization, said being part of that undertaking is one of his proudest moments with the company. “From beginning to end, making sure that all the parties were having success with the deal, was really great,” he said.
Toorak has also prioritized affordable housing in its business by designating large funds for specific use in the development of affordable housing options. For example, in 2021, Toorak dedicated a $500 million fund for the purpose of purchasing long-term rental loans in response to growing demand from investors utilizing fix-to-rent strategies. Beacham explained, “Single-family rentals have been one of the best-performing asset classes in 2020…. These 30-year term loans allow real estate investors to finance non-owner-occupied properties.”
He added, “The lack of affordable homes across the country continues to push housing prices out of reach for many would-be buyers, making single-family rentals an attractive option. Private capital has a massive role to play in the development of housing, the conversion of single-family housing to multifamily housing in some cases, and in the improvement of housing that already exists. We are part of a direct solution to the lack of affordable housing in America.”
SIDEBAR
Predicting the Unpredictable
How Toorak Evaluates and Mitigates Risk in 2022
For a lending platform like Toorak that must evaluate, manage, and deploy millions of dollars in assets daily, risk must always remain top of mind. That is why the company hires experts like Ketan Parekh, head of U.S. lender relations and capital markets, to constantly analyze and then communicate risks and market trends in every area of the company.
“Sometimes, the conversations are hard to have,” Parekh admitted, citing discussions with clients dealing with changes in how the company may deal with market volatility or handle changing guidelines for its lenders. “Our main goal is to make our customers happy, and part of that involves being fully transparent with them about future changes in the market and how we are managing those market risks by making sure loans make sense, are unlikely to default, and fit within our admittedly relatively wide credit box.”
Parekh explained that Toorak analysts on his team and elsewhere in the company evaluate every aspect of every loan that comes through the Toorak Connect Portal, which is a proprietary platform designed to help lenders submit large volumes of loans to the company all at once. This portal is where Toorak’s pricing and guidelines are found. “We evaluate the asset, the loan, the experience and track record of the borrower, and the concentration of risk for any given originator,” Parekh explained. “Loans must fit holistically into our portfolio or we are not serving investors as well as we could be,” he added.
In 2022, as the unpredictable and unprecedented becomes increasingly commonplace, Toorak is focused on identifying risks that are difficult to predict in order to refine the evaluative and mitigative processes. “You have to watch when the Fed might increase rates and by how much they might increase them and hedge accordingly, for example,” said Parekh, “and if we cannot help a client with a certain portfolio of loans, we try to identify other options for the package.” He recommended the same strategy that Toorak uses for its portfolios to investors at all levels of real estate this year. “On a day-to-day basis, you want to manage exposure,” he said. “Diversification is key when you are working hard to make intelligent investment decisions that will lead to good returns.”
SIDEBAR
Toorak By the Numbers
40,000 — families living in Toorak-funded renovations, stabilized properties,
or rental housing
1,000 — families, per month, able to obtain housing via Toorak-funded projects in 2021
2.7 billion — securitization across nine deals
$8 billion — Provided in capital for real estate loans
70+ — lenders in the U.S. and U.K. Being helped to improve their ability to impact local communities through access to capital
$500 million — Dedicated in 2021 to the acquisition of long-term rental investor loans
$363 million — securitization of DSCR loans in March 2022
2022 “Rainmaker in Finance, Debt & Equity”
GlobeSt.com
2021 “Bridging Funding Partner of the Year”
Bridging & Commercial
2021 “Capital Provider of the Year”
Pitbull Conference
2021 Inc. 5000 Company (three-year revenue growth of 411%)
Inc. Magazine
