An Ignoble Experiment: Understanding Why Loan-to-Value (LTV) Matters

Dear Investor,

Today Goodman Capital explains why loan-to-value matters when you're lending money and how it helps protect investors when markets get bumpy. They discuss how spreading risk across multiple properties or adding layers of protection can make a loan much safer.

By way of disclosure, we have an advertising relationship with Goodman Capital, meaning we get paid for making this introduction and sharing this content. As always with these types of deals, consider this an introduction and not a recommendation. Every deal is unique and the responsibility to vet any and every deal you invest in still lies with you. This opportunity is available to accredited investors only.

Last month, we walked through Goodman Capital's investment process, refined over nearly four decades of experience, and our disciplined sourcing, underwriting, structuring, and servicing framework, which have delivered consistent performance for our clients across market cycles. As we begin 2026, we turn our focus to one of the core underwriting pillars driving principal safety and long-term performance in private credit: the loan-to-value (LTV) ratio. Following a brief educational overview in understanding the LTV metric, we will transition into how we employ thoughtful engineering and legal structuring — utilizing tools such as cross-collateralization and debt tranching — to transform LTV into a powerful risk-mitigation tool, and in turn, enhancing returns to investors on a risk-adjusted basis.

Why LTV Matters Most — and Why Structure Determines Safety

All lending strategies rely on the same first line of defense: LTV. In practice, a lower LTV provides:

A wider margin of safety, or equity cushion, to absorb losses from declines in asset values
Higher probability of full recovery of invested principal in a distressed scenario or upon fire-sale
Greater alignment between lender and borrower, who is in the first-loss position should the investment falter

Goodman

However, a standalone LTV metric does not tell the whole story. Two loans with identical headline LTVs can carry significantly different risk profiles depending on the underlying loan structure, among other factors. Much like relying on a single lab result without clinical context, LTV must be evaluated alongside the full structural framework of the loan. For example, a loan secured by multiple collateral properties—i.e., a cross-collateralized loan—spreads the risk across multiple assets securing the loan, versus a single-asset-backed loan, where the risk of collateral value loss is concentrated in a standalone property. Similarly, a loan tiered between a senior and junior lender—i.e., a tranched debt structure—meaningfully improves the credit position of the senior lender. In the event of an underlying borrower default, the senior lender can lien (pun intended) against the junior lender to continue servicing the senior lender's monthly interest payments, or otherwise put the junior lender in default as well. In practice, while LTV provides a correlative indicator of the overall safety of a given loan investment, loan structure provides a causal relationship with the true health of the investment. We will provide two recent case studies illustrating how we financially engineer safe, risk-adjusted LTVs for investors.

Framework: Structured Credit as a Risk-Management Tool,
Figure 1. Structured Credit Illustration #1 — Cross-Collateralization

Goodman Capital

Cross-collateralization is a loan structure that involves securing a single loan by two or more properties, which spreads the credit risk (i.e., risk of principal loss) across multiple assets. This structure protects the lender by ensuring that underperformance in one asset does not jeopardize the overall collateral pool, as the value of the remaining assets helps maintain loan security and investor protection. When investing in a condo inventory loan—i.e., a loan secured by multiple individual units available for sale within a larger building—encumbering multiple condo units (instead of a single unit) is consequential to mitigating risk for investors because of uncertainty around which unit sells first, the proceeds from which provide the source of repayment to investors. In practice, encumbering several assets with a given loan, rather than a single asset—even if the LTVs were otherwise the same—creates a stronger risk-adjusted return for investors.

In the case study above, Goodman Capital closed a $32.16 million senior mortgage loan cross-collateralized by a portfolio of one hundred (100) newly built class A apartments in the prime Borough Park neighborhood of Brooklyn, NY, which we conservatively valued at approximately $69.50 million, implying a very safe 46% LTV. This structure spread the risk of repayment across one hundred different apartments, which secured buyers and sold at various intervals of time, resulting in the repayment of our loan—and return of capital to investors—over the intended two-year loan term.

Figure 2. Structured Credit Illustration #2 — Debt Tranching

Goodman

Debt tranching is a loan structure that involves splitting the total loan into senior and junior tiers based on risk-level, and then selling or syndicating the junior tier, or tranche, to a subordinate capital partner, which increases the margin of safety to the senior lender and reduces risk for its investors. This process introduces another counterparty into the transaction (i.e., a junior lender), which is incentivized to keep the senior lender current on its monthly interest payments or otherwise risk default with the senior lender, in turn enhancing the alignment between the senior and junior lenders. Incurring additional liability to the junior lender should raise the immediate query: why? The answer is intuitive: higher (potential) yield. When a borrower signs a term sheet with a tranched debt structure, the borrower's overall cost reflects a blended interest rate, or return, earned by each lender; the junior lender charges a higher interest rate than the senior lender in exchange for the additional risk of being subordinate in the capital structure. In practice, incorporating a junior lender through thoughtful capital structure engineering via debt tranching can transform a moderate-LTV opportunity into a very conservative LTV investment for the senior lender, thereby significantly improving downside protection while preserving attractive risk-adjusted returns for investors.

In the case study above, Goodman Capital closed a $46.00 million senior mortgage loan cross-collateralized by a portfolio of one hundred fifty (150) newly built class A apartments in the prime Gravesend neighborhood of Brooklyn, NY, which we conservatively valued at approximately $100.00 million, implying a very conservative 46% LTV. Given the borrower's requested loan size and credit risk profile, we chose to syndicate a $10.00 million junior tranche to a subordinate capital partner—a private equity firm with whom we've partnered in similar transactions—reducing our loan exposure to $35.00 million, resulting in an even more conservative 35% LTV. Structuring the loan as a cross-collateralized inventory loan not only spread the risk of repayment across one hundred fifty (150) different apartments, but also introduced a $1+ billion AUM subordinate capital partner to protect our senior position in the event of a borrower default, significantly enhancing risk-adjusted returns to investors. Ultimately, given the strong performance of the collateral asset, the borrower performed as expected and repaid our loan balance through the sale of units over the intended two-year loan term.

Looking Ahead – LCSF II

Liquid Credit Strategy Fund II ("LCSF II"), our second flagship private mortgage REIT, is designed for high-income professionals seeking consistent, tax-efficient yield with significant downside risk protection by applying the same disciplined underwriting, structuring, and risk-management principles discussed above.

Key features of the LCSF II offering include:

10 – 11% target net annual return, with monthly distributions
Enhanced returns with optional compounding via dividend reinvestment plan (DRIP)
Low-LTV senior-secured lending mandate (max 60% LTV; first two deals <50% LTV)
Exposure to Class A residential-oriented assets in primarily high-barrier-to-entry Northeast markets
Tax efficiency: 20% QBI tax deduction and discounted Roth conversion benefits (40 – 50%, est.)
No UBIT/UDFI, making the fund ideal for qualified investors (e.g., self-directed IRA, Solo 401(k), etc.)
Seamless onboarding with Fidelity and Schwab, as well as other custodians

Reserve your Allocation – Second Round Now Open

We invite the WCI community to learn more about LCSF II and how our offering may fit within your portfolio. The next offering round is now available and will be closing February 1st. To reserve your allocation or request additional details:

Schedule a call: Please click here
Email us anytime: invest@goodmancapitalllc.com
Visit our website: www.goodmancapitalllc.com/whitecoatinvestor

Goodman Capital is an alternative real estate investment firm specializing in senior-secured, real estate-backed private lending, built on a multi-decade family lending history that began in 1987 with the origination of our first senior bridge loan on multifamily properties in New York City. Since inception, the firm has completed over $1 billion in closed mortgage transactions and partnered with more than 1,000 investors, including high-net-worth individuals, family offices, and institutional allocators. Our platform combines disciplined underwriting, conservative loan-to-value structures, and a cycle-tested approach designed to prioritize capital preservation across market environments. We operate within an institutional framework supported by dedicated in-house investment and legal teams, third-party administrators, independent auditors, and SEC counsel. Our mission is to educate investors and provide access to senior-secured private credit opportunities structured to deliver consistent, tax-efficient passive income, while maintaining a disciplined approach to risk management and capital preservation across market cycles.

To learn more, watch the Goodman Capital webinar.