Newmarket Capital has recently launched an innovative Battery Finance loan strategy that allows borrowers to use bitcoin as a significant part of their collateral for long-term financing. This new approach aims to reshape the landscape of commercial real estate financing and provide borrowers with more flexibility than traditional lending structures.
On November 7, 2024, the firm successfully closed a refinancing deal for the Bank Street Court apartment in Old City, Philadelphia. This transaction marked a pivotal moment, as the loan was secured not only by the property but also by approximately 20 bitcoin.
According to Andrew Hohns, CEO of Newmarket Capital, the partnership with Ten 31 to form Battery Finance represents a pioneering effort to incorporate bitcoin into financing. Unlike traditional loans that often come with strict prepayment penalties or market-based triggers, this new structure provides flexibility allowing borrowers to repay at any time without facing undue penalties.
What’s particularly intriguing about this approach is that it views bitcoin as a durable value within a broader collateral package. Hohns explains, “We are comfortable recognizing bitcoin as collateral without mark-to-market risk. This enables us to capture the long-term appreciation of bitcoin without the immediate volatility often associated with cryptocurrency markets.” This innovative thinking allows for a secure and advantageous loan environment, potentially appealing to many borrowers.
Battery Finance allows borrowers to utilize bitcoin as 10% to 30% of the collateral for loans, which can range from $10 million to $30 million. The structure also allows for the integration of traditional income-generating assets to enhance financial stability. Hohns notes, “This tool appeals to asset owners looking to convert some of their equity into bitcoin while still making practical investments.” This dual-leverage model could significantly benefit those in the real estate sector seeking innovative financing alternatives.
In the case of the Bank Street Court building, the package included a $12.5 million loan secured with a mix of real estate and bitcoin, with plans to use the funds to settle existing debts and fund property improvements. Notably, this financing structure enables the borrower to not only retain ownership but also potentially benefit from the appreciation of the bitcoin collateral throughout the loan period, thus aligning the interests of both parties.
The structure is designed to cater to long-term bitcoin holders who seek to accomplish various personal and business goals rather than merely holding on to their assets. Hohns articulates, “We want to help individuals realize their dreams without deferring them indefinitely due to market fluctuations.” This represents a fundamental shift in how bitcoin holders can approach their investments, allowing them to leverage their assets to acquire tangible benefits.
Battery Finance is primarily focused on commercial real estate deals but aims to expand its offerings to accommodate a broader range of customers in the future. Hohns envisions a lending environment where bitcoin financing could be accessible for various personal investments, such as homes or vehicles, aligning with the ongoing maturation of the cryptocurrency marketplace.
This groundbreaking initiative from Newmarket Capital could redefine not only how lenders and borrowers interact but also how bitcoin is perceived within financial ecosystems. With innovative strategies that marry traditional finance with emerging technologies, the opportunities for both industries seem boundless.
