Lev Raises $30M to Disrupt Commercial Real Estate Lending

The Evolution of Commercial Real Estate Financing Through Technology

The commercial real estate sector has historically been slow to adopt technological advancements. Despite a substantial addressable financing market exceeding $40 billion, deal execution remains largely a manual, document-intensive, and complex undertaking.

Lev, a New York-based firm, is actively addressing this challenge by automating workflows and integrating vast datasets – numbering in the hundreds of millions – into sophisticated machine learning software. This approach aims to enhance the precision of financing processes. The company has successfully secured $30 million in funding, resulting in a valuation of $130 million, a significant milestone achieved within just two years of its establishment.

Recent Funding and Investment Details

This latest round of financing follows a $10 million seed funding raise completed four months prior, which was spearheaded by NFX. Greenspring led the current investment, with additional participation from First American Title. Existing investors, including NFX, Canaan Partners, JLL Spark, Animo Ventures, and Ludlow Ventures, also contributed, bringing Lev’s total funding to over $34 million, as reported by Crunchbase.

The Genesis of Lev: From Personal Frustration to Industry Innovation

Yaakov Zar, Lev’s founder and CEO, previously co-founded Dispatch, a company specializing in tools for home service businesses. His venture into real estate financing was sparked by a personal experience – a failed mortgage application during a home purchase.

Driven by this frustration, Zar obtained a mortgage loan originator license. Relocating to New York, he assisted a friend with refinancing a building for a non-profit organization, gaining firsthand insight into the fragmented nature of the commercial real estate mortgage industry.

Addressing a Gap in the Market

Zar noted that while companies like Blend are tackling issues within real estate lending, few are concentrating specifically on commercial real estate. Commercial lending is particularly sensitive to fluctuations in interest rates and overall amortization schedules. Furthermore, property owners frequently face refinancing requirements every five to ten years.

“Established firms such as JLL, Cushman Wakefield, and CBRE participate in lending activities, but their approach is predominantly relationship-driven rather than technology-focused,” Zar explained. “We believe a technological component is essential, especially considering the scale and intricacy of these deals. However, transactions under $1 billion are generally more streamlined. In terms of both experience and product offering, we currently have no direct competitors.”

Lev’s Platform and Business Model

Initially, Zar’s team considered replicating the “Rocket Mortgage” model for commercial real estate, but discovered this was impractical due to the practice of brokers independently creating pitch books for lenders. Instead, Lev is developing a platform encompassing over 5,000 lenders, detailing their preferred financing projects.

The platform analyzes a client’s portfolio and swiftly connects them with suitable lenders, charging a fee of 1% of the loan amount per transaction. Lev is also actively working towards enabling fully online deal closures.

Strategic Funding and Future Growth

Zar clarified that he wasn’t actively seeking funding when approached by investors, but was persuaded by the enthusiasm for the company’s growth and potential.

The new funding will be allocated to product development, with the goal of issuing term sheets within seconds and finalizing loans in just seven days. Currently, obtaining a term sheet can take a week or two, while loan closure typically requires 45 to 90 days.

Team Expansion and Performance Metrics

Lev currently employs approximately 40 individuals across its New York headquarters, a Miami R&D center, a Los Angeles office, and remote locations. Continued investment will support further team expansion.

The company experienced a tenfold increase in transaction volume over the past year, closing around $100 million in loans in 2020. Zar projects exceeding $1 billion in loan closures for 2021.

“Our clients demonstrate strong loyalty, returning for repeat business and providing numerous referrals,” Zar stated. “Our ambition is to become the central platform for capital market transactions, offering a competitive advantage in networking and deal sourcing. We aim to facilitate the closing process and provide asset managers with the optimal solution for online deal management from a unified platform.”

Industry Validation and Investor Perspective

Pete Flint, a general partner at NFX, shared his positive assessment of the Lev team, having monitored their progress over the past 18 months, including throughout the challenges of the global pandemic. He was impressed by their adaptability and resilience.

Drawing on his experience as co-founder of Trulia, Flint recognized the historical issues in real estate surrounding search and discovery, and the subsequent shift in focus towards financing. NFX also invests in Tomo and Ribbon, both focused on residential financing.

Seeking opportunities within the commercial real estate sector, Flint found that Lev’s name consistently emerged among brokers and industry experts.

“Through our interactions with the Lev team, we identified them as the most capable group to address this problem,” Flint concluded. “We are fortunate to be joined by a distinguished group of investors, bringing valuable industry insights and facilitating strategic business development opportunities.”