Citing an increasingly volatile market that has significantly disrupted its revenue stream, El Segundo-based PeerStreet has filed for Chapter 11 bankruptcy protection.
The filing late last month comes after multiple cost-saving and restructuring attempts by the company, which runs an online platform for people to both invest in real estate debt and tap into mortgage capital. The first hearing is expected to take place later this month.
Founded in 2013 by Brewster Johnson, PeerStreet has experienced substantial revenue declines this year, according to company filings. Citing average interest rates that more than doubled since January 2022, PeerStreet noted that demand for mortgages has dropped significantly this year and that institutional buyers have “largely halted” purchases of below-current-market-rate loans.
The filing — authored by David Dunn, who was appointed as the chief restructuring officer — noted that PeerStreet originated around $696 million in mortgages in 2021. Last year, that number dropped to $385 million. This year so far, the company has originated just $5.4 million.
Given that PeerStreet earns premiums on these transactions, the near erasure of that market — coupled with the drying up of venture capital investments — dealt a fatal blow to the company.
In previous funding rounds, PeerStreet had garnered $60 million in series C money in 2019 and $29.5 million in series B money in 2018. PeerStreet also received $3.7 million from the Small Business Administration via funds for the Paycheck Protection Program in 2020, but unsuccessfully applied to have the loan forgiven.
Last year, PeerStreet underwent a substantial series of layoffs, bringing its employee count from 281 to a current tally of 28. However, the company failed to negotiate alternatives to bankruptcy filing or attract additional outside capital to bail it out. The company now seeks to sell off its mortgage loan assets, technology platform and other pieces of its operation to “maximize value for all of PeerStreet’s stakeholders,” according to a statement.
