How Roc360 Approaches Deal Flow and Capital Raise

The most successful players in the real estate lending space understand the importance of diversification.

If you want to grow and thrive in the industry, you must be a machine built for that, according to Eric Abramovich, co-founder of Roc360, a platform that has become a national leader in originating residential business purpose loans to real estate investors.

Abramovich, his partners, and the company’s team have spent the last decade refining a business model that has consistently fostered deal flow and established a robust foundation for capital raising, even during the most turbulent economies. Originate Report recounted Roc360’s journey with Abramovich and how a background on Wall Street, an “Aha!” moment, and a steadfast obsession with diversified capital has led to stitching up a fragmented market by building and acquiring companies that have funded more than $25 billion in loans throughout the country.

Trading Spaces

The three co-founders of Roc360, Abramovich, Arvind Raghunathan, and Maksim Stavinsky met over 20 years ago working together on Wall Street managing portfolios and developing global trading strategies for Deutsche Bank. After a decade at the bank, when the financial crisis in 2009 occurred, the three spun out and formed what would become the largest hedge fund launch at $1.3 billion.

“That was the beginning of what I call Roc 1.0,” Abramovich said. “But then the things we were doing stopped working. When we raised the money, our returns flatlined.”

Backed by a strong working relationship, sharp expertise in finance, and a deeper understanding of raising capital and how financial markets operated, the three set out to find new sustainability and growth for the company. The answer came in 2014 by way of an introduction to a private lender who was securing $100 million in fix and flip loans annually.

“How were he and others surviving? They were scraping together money for deals. They were forming private funds, going to churches, asking family and friends,” he said. “It was a very painful existence. That’s one of the reasons it was referred to as ‘hard money lending’ back then.” The Roc360 partners knew if they happened upon one lender securing that much in funding, there must be hundreds of others across the country.

“We thought to ourselves: we come from a banking background. What if we could take institutional capital and inject it into this space? Real institutional money, billions of dollars, and bring it to this untouched space,” Abramovich said. “We can bring so much value to them and help them scale. We would provide the capital for them, and we would provide the back office. The only thing they would have to do is bring us the loans.”

The new strategy entailed the development of a new business model to originate loans and place them with a diversified group of investors. The move would help close the gaps for smaller lenders in the industry, making funding more efficient for them by turning the brokers into lenders. The development of Roc Capital’s Private Lender Program, which Abramovich terms Roc 2.0, and the rebranding to Roc360, bears a similar company name with the same brand ethos and vision, but a completely different operating procedure.

Put To The Test

With an unwavering vision to connect Wall Street with the far-off reaches of Main Street, Abramovich said the partners are ever mindful of operating with sustainability at the forefront, often reminded of the industry’s struggle following the 2009 financial crises. Their approach to growth took a slow, steady speed, making decisions that mitigated risks should another economic fluctuation occur.

Then it did.

“During Covid, institutional money dried up quickly. They pulled back. That hurt a lot of people. What made Roc360 different at that point is that we continued to lend,” he said. “We had spent so much time capital raising that we had a diversity of capital when the bad times came around, and we could continue lending without interruption. Many of our competitors experienced extreme distress, and their clients did, too.”

Roc360 was unlevered and without margin calls entering the Covid years, which was uncommon for the institutional lending space. Instead, the company was able to rely on committed insurance capital to see it through the pandemic.

“The most interesting feature that came out of it was watching the cycles come through the system. It forced our clients, the local lenders, to adapt. Those who stayed close to us did well,” he said. “Covid exposed the risks of everyone’s business. All the bad loans made their way to the front. As Warren Buffett famously said, ‘You don’t find out who’s been swimming naked until the tide goes out.’ It is not always pretty. But what we learned was that Roc360 will be a steady hand in all market cycles.”

Broadened Horizons

Roc360 has continued to scale into a company that employs close to 400 people across three continents who all seek to streamline the lending process, offering a full-circle suite of ancillary services to support Roc Capital and its white label table funding, including direct lending, property insurance, title insurance, and an appraisal management company. In 2023, the company announced the formation of the Roc360 Real Estate Income Trust, Inc. in a move that will further diversify capital sources.

Abramovich said by addressing the residential real estate industry from all sides, Roc360 has successfully carved a path to creating more deal flow that results in stable, consistent, and diversified capital.

“We will continue to obsess over diversified capital. That’s how we took a lender with nothing to a billion dollars. We offer that commitment to all our clients. They know with us that the capital won’t go away when the market blinks,” he said. “We are one of the few large lenders remaining that isn’t tied up with any one company. The diversification of capital will help us ensure long-term survival and prosperity.”