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Sortis Accelerates Investment Activity Amid Crisis

With businesses across the country struggling to stay afloat amid spikes of coronavirus cases, SORTIS HOLDINGS SOHI is one company whose investors have entrusted to expand its portfolio amid the still-unfolding economic devastation. Sortis, a Northwestern, U.S.-based alternate investment firm with offices in Portland, OR, and Seattle, WA, has embarked on a string of inspired projects in 2020. The firm is finding both long and short-term opportunities to demonstrate its belief in the Pacific Northwest’s ability to rebound from this year’s chaos.  

When air-travel was no longer a safe option for many summer travelers, and airlines estimated they would lose more than $300 billion in revenue this year, Sortis placed a bet on outdoor and RV brand Happier Camper. And as businesses shuttered during the lockdown, leading to 22 million American job losses in March and April alone, Sortis used its resources to rescue Seattle’s Rudy’s Barbershop chain, restore the company’s founders to leadership roles, and position it for a reopened future. 

Operating from a secure base of success and expertise in real estate and finance, Sortis is confident in its team’s ability to navigate current chaos and future curveballs.

“Our team and platform worked through the last recession to successfully underwrite and sell over a billion dollars of distressed real estate loans and assets from bank balance sheets. This background, added to our lending and real estate developing expertise, puts us in the perfect position to bring significant value to our investors participating in the opportunities this current economic environment provides,” stated Paul Brenneke, Sortis Holdings Executive Chairman.

Brenneke is perhaps best-known to the Seattle community as the manager of Sortis’ affiliate Third and Pine LLC, which is helping lead the redevelopment of downtown Seattle’s iconic Macy’s building at 300 Pine. This building is expected to bring digital retail giant, Inc. AMZN 1.54% into 700,000 SF of office space into the revamped historic landmark originally opened in 1929. Sortis manages a diverse set of funds and holdings infused with a similar sense of ambitious, high-return potential while aiming to foster growth across multiple sectors of the Pacific Northwest’s economy and beyond. 

Despite overall global economic setbacks, Sortis Holdings continues to show that it is built to adapt to tough economic periods and to thrive in spite of downturns. Profits are consistent or growing across Sortis’ diversified funds. And shares in the company are up more than 233 percent YTD, as investors begin to recognize and appreciate Sortis and its long-term potential. 

SOHI: The Year So Far

January 23, 2020:
Sortis announces that its Sortis Income Fund (SIF) closed out 2019 with its 12th consecutive quarter of annualized yields above 10%. For the fourth quarter of 2019, the SIF reported a net annualized return of 10.2%. For full-year 2019, net annualized returns came in at 10.7%. The SIF returned 12.2% and 11.1% in 2017 and 2018, respectively.

“Investor interest in the fund, which more than tripled in size in 2019, continues to grow.” said Jef Baker, Sortis Income Fund managing director.

January 29, 2020:
Sortis Holdings announces the launch of its $10 million growth fund. The fund opened to accredited investors and maintains a target return on invested capital of 20%.

April 29, 2020:
Amid the unprecedented turmoil of 2020’s first quarter, Sortis announces that its income fund produced a net annualized return of 7.1%. The unleveraged mortgage fund focuses on short-term notes that are collateralized by real estate assets. 

May 18, 2020:
Sortis launches its latest investment fund, the Sortis Rescue Fund (SRF), an active response to the coronavirus pandemic. The SRF is designed to locate and capitalize on distressed real estate and business opportunities while aiding beloved businesses threatened by COVID-19’s profound disruption across many sectors of the economy.

May 29, 2020:
Sortis discloses its Rudy’s Barbershop rescue operation, saving the beloved community business from bankruptcy accelerated by pandemic shutdowns and placing control of the business back into the hands of the company’s co-founders.

“What intrigued us most beyond the investment itself was the opportunity to help preserve an iconic Seattle business and the culture it represented,” says Executive Chairman Paul Brenneke. “It’s these small to mid-sized companies with unique visions and customer experiences that can thrive in a new era of retail post-pandemic.”

The deal received wide-spread recognition from numerous media outlets, such as the Seattle Times, the Portland Business Journal and others.

June 17, 2020:
Sortis Holdings announces that its growth fund has placed its first investment into Happier Camper, building from an existing collaboration on e-Commerce strategy.

“Happier Camper is a perfect first investment for our fund,” said Butch Bannon, fund manager and principal. “The demand for their products is incredible and we are excited with the leadership’s vision and plans for the future.”

Sortis Family Of Funds

Currently, Sortis manages four active funds: Sortis Income Fund, Sortis Rescue Fund, Sortis Opportunity Zone Fund, and the Sortis Growth Fund.

Sortis Income Fund
The Sortis Income Fund (SIF), the company’s flagship fund, has a three-year track record averaging annual returns of 10.39% net to its investors. The $100 million real estate loan fund focuses on generating high-yield and fixed income returns to its investors that are distributed every quarter. The fund is unleveraged and holds first lien positions on real estate collateral. It is the ultimate defensive position in a volatile market because the underwriting is collateral focused on 65% average loan-to-value (LTV) in the portfolio.

During the first quarter of 2020, when the broader stock market effectively collapsed and real estate investment trusts (REITs) were experiencing hefty losses, the SIF still returned a positive annualized return of 7.1%. Furthermore, the SIF actually reported net inflows of $13 million during Q1 2020, compared to the strong net outflows that were experienced by investment funds across the board.

Sortis looks to take advantage of inefficiency in the marketplace with its speed to closing and the ability to understand complex deals. SIF only works with short-term maturities (6-24 months) and experienced real estate operators (not borrowers). SIF focuses on opportunities in the Western United States, primarily in the Pacific Northwest. The Sortis Income Fund is available on most self-directed IRA platforms.

“In an environment where the stock market has dropped significantly, REIT valuations have plummeted and other funds are paying little to no dividends, we take pride in delivering a solid return to our investor base,” notes Jef Baker, SIF Managing Director. “We kept dry powder on the sidelines all through March, which slightly lowered our yields for Q1. That patience should pay dividends in Q2 as we are already seeing once in a cycle lending opportunities.” 

Sortis Rescue Fund
Launched in May 2020, the $50 million Sortis Rescue Fund is a new opportunity fund designed to capitalize on the dislocation and market stress caused by the COVID-19 pandemic and subsequent global economic fallout. As bankruptcies and closures continue to rise amid efforts to help stop the spread of the virus, rescue and distress investment opportunities have once again come into focus.

The Sortis Rescue Fund primarily focuses on opportunities across the Northwestern United States, where the company’s knowledge and capital can acquire, solve, restructure or recapitalize real estate secured loans, real estate assets, business assets, and alternative investment products. Rather than taking a vulture-style approach to distressed opportunities, Sortis aims for opportunities that can create win-win scenarios that benefit all sides and help preserve small businesses that have become the backbone of local economies. 

The perfect example of this is the SRF’s recent rescue operation of Seattle’s famed Rudy’s Barbershop. Sortis’ seasoned team of financial professionals restored control of Rudy’s to its original owners after pandemic-related closures forced a New York vulture fund, who purchased the chain in 2014, into bankruptcy. 

Publications like the Seattle Times and the Portland Business Journal praised the positive cultural impact of the move in the Seattle community where it is headquartered, as well the economic benefit to potentially displaced workers who rely on the chain for employment. It also allowed Sortis to demonstrate that it is a rising Pacific Northwest player that believes that restoring a community’s character can also mean investors will profit. 

Sortis Opportunity Zone Fund
Sortis’ Opportunity Zone Fund is a $100 million fund that focuses on real estate development and investing in opportunity zones, primarily in the Western United States. Opportunity zones are a relatively new investment category, which was created through the Tax Cuts and Jobs Act in December 2017.

Opportunity zone investing has very strong incentives and tax savings, which makes them ideal investments for long-term-minded investors. An investor who has realized a capital gain by selling an asset like stocks or real estate can receive special tax benefits if they reinvest that gain into an Opportunity Fund within 180 days. The three primary advantages to rolling over a capital gain into an Opportunity Zone Fund:

1.      Ability to defer capital gains payments until December 31, 2026
2.      Reduced benefit drops to 10% after five years
3.      After ten years, investors are eligible to pay zero taxes on capital gains that were earned from opportunity zone investments

In August 2019, the company announced that it had closed on a $59.8 million opportunity zone project for Tukwila Village Phase II, a planned mixed-income 55+ multifamily development located in Tukwila, Washington. Sortis’ $100 million Opportunity Zone Fund worked with project sponsor Bryan Park, an expert senior living professional who has developed, owned and operated over 5,000 senior living apartments in Washington. Once completed, the project will be operated and run by Sustainable Housing for Ageless Generations (SHAG), a non-profit organization.

Sortis Growth Fund
The Sortis Growth Fund (SGF) is a unique take on consumer-oriented private equity. The goal of the $10 million fund is to help existing profitable consumer brands accelerate their growth by providing a capital infusion and digital strategy to expand demand and revenue.

Through its partnership with the world-renowned web design company, WLCR, Sortis is positioned to help consumer brands and startups build user-friendly, mobile-centric websites that help drive demand using a direct-to-consumer (D2C) model.

“This is an unprecedented time in the market where a robust e-commerce strategy has gone from a want to a necessity for survival,” said Butch Bannon SGF Manager and Principal. “We are seeing an unprecedented amount of deals because our captive digital team combined with capital makes us totally unique in the consumer private equity space.”

Sortis announced that the SGF would make its first investment in June 2020, when it entered into a deal with Happier Camper. Founded in 2016, Happier Camper offers a line of compact and flexible campers, which are designed to be more functional, stylish, and affordable than traditional campers and RVs. 

The camping and RV industry was experiencing a renaissance among millennials and families that accelerated in the wake of the coronavirus outbreak, making Sortis’ investment in Happier Camper well-timed. 

According to a recent Bloomberg report, RV shopping for “COVID campers” rose as much as 30 percent across some dealerships when compared to the same period in 2019. The RV Industry Association recently released results of a survey which showed that 20% of Americans are more interested in RV traveling than in an airplane due to continuing safety concerns. As a result, the RV Industry Association estimates that “46 million Americans will take an RV trip in the next year,” according to the organization.

Sortis Holdings is a Northwestern, U.S.-based alternate investment firm with offices in Portland, OR and Seattle, WA. The firm’s primary focus is on real estate including managed funds with positions in both debt and equity. Tracing its roots as a bank holding company, Sortis has since transformed into a diversified alternate investment firm that offers fund management, lending, development, advisory and real estate brokerage services. The Sortis team has a strong line-up of former bankers as well as seasoned real estate professionals giving them a great bench to draw from.