Janover: Bringing Better Experience to Real Estate Lending

 PRIME SERIES

• Janover brings a new search and application platform to the commercial real estate lending market, using technology and artificial intelligence to make the process more human.

• Real estate lending is expected to recover in 2024, after inflation, rising interest rates and persistent vacancies due to persistent work-from home arrangements led to a decade low in 2023.

• Recovery in real estate loan activity or none, frictions in the lending process present obstacles and increase costs for borrowers and frustrate lenders looking for customers.        

• The Janover team believes they can democratize the prevailing real estate lending sector with a platform that brings transparency to lender discovery and streamlines applications.

• A recent strategic acquisition of a complementary business and new partnerships are expected to boost growth beginning in the current year.

• Janover stock appears to have gone unnoticed by investors, leaving an unappreciated opportunity in the fintech sector.

 

The real estate industry is staging for a recovery this year as inflation subsides and interest rates stabilize.  The Mortgage Bankers Association estimates the industry could experience 19% increase in the dollar value of all real estate loan volume in 2024 over 2023.  Commercial and multifamily mortgage loans are expected to lead the industry with 29% year-over-year increase in loan value. 

The turnaround is not likely there will be a complete U-turn to how things were in real estate lending before the coronavirus pandemic with the attendant inflation and higher interest rates.  Demand for office space has been profoundly altered, shifting plans and strategies for real estate projects. Perhaps more importantly, real estate professionals are looking for change in how they go about their business.

Decision makers of all stripes have grown accustomed to the immediacy and convenience of digital applications.  The analog practices of the past are just not good enough for the present-day real estate sector.  Technology based on artificial intelligence (AI) is well-suited to industry that requires participants to wade through vast amounts of data.  Programs enhanced with AI can efficiently sift through the bits and bytes to streamline property search and analysis, deepen due diligence, fine tune project design or match compatible counterparties.

 

Fintech Marketplace Debuts as Real Estate Sector Rebounds

Janover, Inc. (JNVR) may have debuted its business-to-business fintech marketplace at precisely the right time as the real estate sector reawakens and developers need financing.  Proprietary algorithms in the platform automatically connect borrowers to optimum loan options or to the advisors best suited to serve as a guide to the most suitable loan product.  For borrowers the Janover marketplace brings transparency and breadth to the task of finding a suitable lender whether in their own neighborhood or beyond.  On the other side, loan originators and other capital markets players can more easily communicate with borrowers in any geography.

The Janover team believes their platform can democratize commercial real estate lending.  An effective and efficient experience is expected to help build the Janover brand for high quality service and financing success.  In a recent meeting with this author, the Company’s CEO Blake Janover pointed to increasing traffic and users on the marketplace.  In 2023, the Company’s platform recorded 88 million impressions and over 450 lender participants have signed up.  Lenders include two-thirds of the largest 100 credit unions and nearly 10% of FDIC insured banks in the U.S.  Over 100,000 borrows have made applications and closed transactions totaled in excess of $600 million.

Revenue Streams from Lending Activity

Closed loans are important to Janover since most of the Company’s fees are earned based on loan value.  So far collected fees have averaged about 1% of total loan amount.  Fees are paid at loan closing, giving Janover’s business model the benefit of revenue visibility and collection.

The Company saw a strong boost in revenue from its platform in the year 2022, growing 8.6% year-over-year to $2.15 million.  However, sales activity in the year 2023, seems to have succumbed to the real estate industry malaise as revenue slipped slightly to $2.11 million in the twelve months ending September 2023.

To achieve profitability the Company will need to pick up the pace as the industry leans into the current year 2024.  In the first nine months of 2023, the Company reported operating expenses more than twice its revenue.  That said, it is important to note the usage of cash support operations was significantly less than reported expenses, totaling $908,139.  This compares better to $1,652,965 in total revenue in the first nine months of 2023.  Stock based compensation and the issuance of common stock to pay for professional services helped conserve cash resources.  (All financial figures are from reports filed with the SEC at SEC.gov.)

Balance Sheet Strength

For any company that is still scaling up, it is important for investors to look closely at the balance sheet.  In Janover’s case, its cash kitty was fortified in July 2023, by a common stock offering, in which 1.4 million shares were sold at $4.00 per share.  The deal brought total shares outstanding to 10.0 million and cash in the bank to $5.8 million at the end of September 2023.  The Company has no debt to service, so cash resources can be devoted exclusively to support operations and growth initiatives.

Robust Sales Funnel

One of the keys to success is a robust sales funnel.  The Company brags that over 88 million have visited the Company’s online platform to review helpful real estate related content. 

To reach additional prospects, Janover has formed a strategic partnership with La Rosa Holdings, an agent-centric real estate company specializing in residential and commercial real estate brokerage.  La Rosa will introduce Janover to clients seeking a commercial loan and in return La Rosa’s brokers will get visibility on the Janover marketplace.  As better loan outcomes build, the relationship is expected to have a reinforcing effect for both companies.

A similar strategically advantageous partnership was made earlier in 2023, with Xchange.loans, Inc., an online marketplace for buying and selling commercial loans.  Cross-promotion of the respective loan products is likely to benefit both Xchange and Janover.  As refinancing activity picks up in 2024, members of Janover’s lending network is likely well poised to use Xchange’s services to sell their existing mortgages.

The Company may have received some free help in gaining market visibility.  The Janover platform was recently recognized by GlobeSt.com and an ‘influencer’ in commercial real estate technology.   GlobeSt.com itself gets over a half-million page views per month from professionals and consumers looking for recommendations on commercial real estate topics.

Strategic Investments Could Ratchet Revenue Higher

Additional growth could follow strategic investments.  In November 2023, Janover acquired Groundbreaker Technologies, a privately-held software-as-a-service platform for commercial property professionals.  Transaction details were not disclosed. 

The platform enables customer relationship management among other key functions.  The SaaS model is expected to become an important revenue generator for the Company.  Indeed, since the Groundbreaker deal was completed, Janover initiated an AI-enabled chatbot for commercial lenders.  The chatbot is expected to improve communications with potential borrowers, speeding up the mutual screening and qualification process between lenders and borrowers.  The chatbot is being tested by Gelt Financial, a nationwide private real estate lender that boast providing over $1 billion in financings since inception.  The chatbot will be initially launched with a select group of commercial lenders.

Janover has also invested in a complementary product offering to better leverage the Company’s building lender and borrower networks.   In January 2024, the company launch Janover Insurance Group as a provider of multifamily and commercial property insurance.  All real estate projects require insurance and much like the task of finding a good lender, pursuit of the best insurance coverage is frustrating and time consuming.  Janover has engaged a strategic advisor to organize and launch the commercial insurance offering later in 2024.

Investors Beware

Janover appears to have considerable opportunity ahead for its innovative fintech platform.  Nonetheless, investors will need a lengthy investment horizon to wait for the Company to scale and reach profitability.  A patient temperament may also be needed to establish a long position in JNVR.  Trading volume averages about 80,000 shares per session.  The modest trading activity stems in large part to flotation.  Insiders command nearly two-thirds of the outstanding common stock shares.  Thus, the constructive flotation of tradeable shares is around 4.0 million.  Stocks with lower flotation can be more volatile and bid/ask spreads can be wider.

Significant inside ownership presents a second concern for investors.  The majority shareholder is the Company’s founder, chairman and chief executive officer, Blake Janover.  In addition to 5.8 million shares of common stock, Mr. Janover owns 10,000 shares of Series A preferred stock with voting power.  Consequently, he has considerable control over the Company’s strategic direction and the deployment of assets.  Until additional shares are sold to minority investors or Mr. Janover divests shares, shareholders influence over the Company’s future could be limited to jaw boning leadership.

There is another risk to a long position in JNVR.  Favorable trends in commercial real estate lending are attracting others to the fintech space, potentially giving Janover some competition for borrower and lender interest.  For example, LoanStreet, Inc. offers a platform for credit unions, banks and other lenders to manage loan portfolios with streamlined processes and analytical tools.  Likewise, Blend operates a platform to help lenders speed up and simplify the application approval process for loans and mortgages.  Even if these two companies are not offering exactly the same product as Janover, they are competing for the attention of the same lenders.  StackSource may be a more direct competitor with its platform connecting commercial real estate investors with debt and equity financing sources. 

The presence of other fintech players could have two sides.  On the one hand they are competing for the attention of the same group of lenders and potentially borrowers as well.  Then again multiple sources of the same fintech message could help build legitimacy for the entire group.  Either way, the most robust platform will probably grab the greatest market share. 

Conclusion

So far is appears Janover’s B2B Fintech Marketplace could take top honors for robust functionality.  Furthermore, the Janover team has plans to add even more services and products to make real estate development easier.  Expect the reports for the year ending December 2023 each quarter report during 2024, to impact the stock price and trading activity as the Company reports progress with boosting marketplace activity.

 

 

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.

Underwriters of the Prime series may have a beneficial interest in, serve as agents of, or act as advisors to the companies mentioned herein.