Executive Overview

Whiterock AI Inc. DBA DebtProtect (“DebtProtect”) is in contract to purchase the bad debt of 3rd Ave Investments, LLC (“3rd Ave”), a Phoenix-based value-add multifamily investor with over $1.2 billion in asset aggregate market value. 3rd Ave is enrolling its Arizona and Nevada portfolio. The portfolio comprises mostly class-B multifamily properties renovated under 3rd Ave’s ownership. Post renovation, the operator implements strict tenant application standards to ensure that only qualified applicants get in. 

3rd Ave Investments booked ~$820K of bad debt over the last twelve months with a gross recovery of 6.54%, exceeding the national gross recovery rate. After fees, the operator recovered 4.90%. 3rd Ave’s portfolio presents a significant upside because (a) it is located in landlord-friendly states where residents expect some level of collections, (b) class-B residents are aware of debt consequences and are credit score conscious, and (c) 3rd Ave makes all reasonable efforts to screen residents thoroughly to limit delinquencies.

We see an opportunity to recover 12% to 16% of the total debt assigned. In addition, we implemented an $8,000 debt cap, which means that any debt above $8,000 will not be purchased. Instead, it will be collected by the DebtProtect team and 60% of the proceeds will go to the operator. This means that DebtProtect can protect its downside while retaining the recovery upside.