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Real estate debt marketplace PeerStreet has filed for Chapter 11 bankruptcy protection, saying the company intends to sell “substantially all of its assets,” including its technology platform and outstanding mortgage debt that it’s collecting payments on.
Launched in 2014 to aggregate fix-and-flip loans from lenders around the country, PeerStreet boasted Michael Burry of “The Big Short” fame as an investor.
While backed by prominent venture capital firms including Andreessen Horowitz, World Innovation Lab and Thomvest, PeerStreet’s bankruptcy filing also threatens to leave as many as 10,000 retail investors in the lurch.
According to a bankruptcy petition filed Monday by Peer Street Inc. — one of 15 debtor petitions filed by PeerStreet and its related companies in the case — Andreessen Horowitz owns about 21 percent of the company, World Innovation Lab holds a roughly 13 percent interest and co-founder and CEO Brew Johnson owns close to 14 percent of the company.
All but two of the company’s 20 largest unsecured creditors are retail investors. Those 18 retail investors are owed about $72 million, with claims ranging from $726,000 to $33.9 million each. The other top 20 unsecured creditors are the Small Business Administration, which is owed $3.78 million, and Chicago-based Invigorate Finance LLC, which is owed $3.3 million.
Peer Street Inc. disclosed that all told, it owes $50 million to $100 million to between 100 and 199 creditors.
The other related companies that are the biggest debtors in the case are PS Funding Inc., which owes $100 million to $500 million to between 100 and 199 creditors; and Peer Street Funding LLC, which owes $100 million to $500 million to between 5,000 and 10,000 creditors.
Although companies that file for Chapter 11 bankruptcy protection are often seeking breathing room from creditors that will allow them to get back on their feet, PeerStreet said in an announcement Tuesday that it plans to sell substantially all of its assets “in a series of transactions intended to maximize value for all of PeerStreet’s stakeholders.”
David Dunn of Province Inc., who is advising PeerStreet as chief restructuring officer, had not responded to Inman’s request for comment by press time on what led the company to file for bankruptcy protection or about its future prospects.
In a Feb. 15 notice to the California Employment Development Department, PeerStreet said it expected to lay off 43 of its 64 full-time employees in California, Florida, Illinois, North Carolina, New York, South Carolina, Texas, Utah and Washington by April 16.
In its voluntary petition to the U.S. Bankruptcy Court for the District of Delaware, the company said it expected that funds from the proceeds of the sale of its assets “will be available for distribution to unsecured creditors.”
That’s at least a glimmer of hope for unsecured creditors, who sometimes don’t get anything when companies file for bankruptcy after secured creditors and administrative expenses are paid.
PeerStreet boasted that its “unique technology-driven marketplace enables investors to diversify their capital in a fixed-income asset class that had previously been difficult for individuals to access.”
In 2019, PeerStreet company lowered the minimum investment in its real estate-backed loans from $1,000 to $100. In late 2021, PeerStreet launched a secondary marketplace allowing investors to sell fractional positions in loans.
“We believe making real estate debt as accessible and easy to trade as stocks will have large ramifications on the industry and open up more avenues for wealth creation for market participants,” PeerStreet co-founder Brett Crosby said at the time.
Crosby — who helped create Google Analytics after another company he co-founded, Urchin, was acquired by Google — transitioned from PeerStreet’s chief customer officer to an adviser last summer, according to his LinkedIn profile.
Editor’s note: This story has been updated to correct that the 18 retail investors who are PeerStreet’s 20 biggest unsecured creditors are owed about $72 million.
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