Harvey Capital 2025 Annual Update
A commentary on our performance during 2025
Harvey Capital I LP investors,
Our gain in net worth during 2025 was $391,109.13, which increased our book value by 21.51% based on our equity balance at the beginning of the year. Of this, $234,681.82 was realized (12.91%), and $156,427.31 (8.60%) was our unrealized gain.
Our current performance is steady, but the real strength of our strategy will likely be evident when the market stabilizes or retracts. We view the present euphoria in the market as a late-stage phenomenon. Accordingly, we are doubling down on our core mission: uncovering undervalued opportunities in inefficient pockets of the real estate market.
Asset allocation
Below provides a visual illustration of our asset allocation as of 12/31/25. I’ll provide a brief update on each of these below.
Short-Term Loans - This consists of a portfolio of 14 loans made to real estate operators that are due in 12 months or less. These are all first lien position loans secured to real property. I will expand on this further into my update as this will likely be a core focus of ours for the foreseeable future.
Millrose Properties - Our investment in Millrose, a spinoff from Lennar, was driven by a rare alignment of technical selling pressures. As a smaller entity departing the S&P 500, Millrose faced immediate “forced selling” from index funds unable to hold it. This was compounded by the deal’s status as a taxable spinoff, which created “phantom income” for shareholders and likely triggered liquidations to cover tax liabilities. Furthermore, the natural disconnect between homebuilder investors seeking growth and REIT investors seeking income created a pricing vacuum, allowing us to build a position at an exceptionally attractive entry point.
Millrose operates as a public land banking company, providing an “evergreen” capital solution in a space typically dominated by private, short-term players. They facilitate the “asset-light” model now favored by major homebuilders by holding land on their own balance sheet while granting builders control through option agreements. This allows builders to focus on construction rather than land ownership. Millrose generates steady, bond-like cash flow through option fees and non-refundable deposits—a model that became even more compelling once they proved they could secure third-party contracts at higher rates than those initially set with Lennar.
Despite the straightforward nature of its earnings potential and its commitment to a 100% dividend payout, the market significantly underpriced Millrose during its first months of trading. While the primary risk is being held with entitled land during a downturn, the nationwide housing shortage and Millrose’s structural safeguards mitigate this concern. Ultimately, our low entry price provides a significant margin of safety. As the market continues to recognize the strength of this unique business model and its ability to capture a larger share of the land banking pie, we expect the valuation gap to continue narrowing.
DSP RB Meadows - This is a private multifamily syndication we invested in that owns a 148-unit BTR apartment community in Martinsburg, WV. This was a 2023-built property acquired at an attractive price and is run by an experienced operator. I’ve talked in prior updates in-depth about this and you can refer to those if you’d like more info.
ECC Capital Corp - ECC is a former subprime lender that resurfaced in 2021 after a long period of dormancy following the Great Recession. Because it carries legacy non-recourse mortgage debt that makes its balance sheet screen poorly, it has been largely overlooked by the broader market. The core of the opportunity lies in a 2024 transaction where PhenixFIN (PFX) acquired a controlling stake in ECC and sold the Kemmerer coal mine to ECC for $34 million. This deal was strategically designed to “harvest” ECC’s $500 million in Net Operating Losses (NOLs), allowing the company to run massive amounts of income through the entity virtually tax-free.
The Kemmerer Mine, sitting on about 13,000 acres in the Powder River Basin, is currently a “cash cow” that has been generating more annual operating income than the company’s entire market cap. While the mine’s existing contracts are set to expire by late 2026, creating a “runoff” profile on paper, the sheer volume of cash being generated in the interim provides a massive margin of safety. Management of this capital is overseen by PhenixFIN’s CEO, David Lorber, who has a proven track record of efficient capital allocation and significant shareholder value creation since 2021.
Beyond the immediate cash flow, ECC holds several “free call options.” The most significant is the surging demand for power driven by AI data centers, which could revitalize demand for thermal coal and extend the mine’s terminal value. Furthermore, the current administration’s coal-friendly policies—including reduced federal royalty rates and the opening of new leases—significantly lower operating expenses. With a net equity value (excluding legacy debt) of nearly double its current market cap and a stake in an aerospace manufacturer, ECC represents an asymmetric bet where the current cash generation alone justifies the price, while the energy resurgence provides significant upside.
Comstock Holding Companies - CHCI is a debt-free real estate asset manager that successfully pivoted from a volatile homebuilding model to a high-margin, asset-light strategy. Despite generating returns on equity over 20% and maintaining a revenue base that is 85% recurring, the market continues to price the company at a deep discount—likely due to its small cap size and historical baggage. The company currently manages “trophy” class-A assets in Northern Virginia’s high-growth Dulles Corridor, benefiting from a “flight to quality” in the commercial and multi-family sectors.
The investment’s primary engine is a long-term Asset Management Agreement (AMA) with “Partners,” a private entity owned by the company’s founders. This agreement effectively covers Comstock’s overhead while providing a steady stream of management, construction, and incentive fees. With the founders owning over 60% of CHCI, interests are tightly aligned. The “Anchor Portfolio” they manage is slated to nearly double in size over the coming years, creating a clear path for fee growth without requiring the public company to take on balance-sheet risk.
Recent developments indicate a massive growth spurt is imminent, with a 29% increase in managed square footage expected to go live within the next 12–24 months. These new deliveries, which include luxury residential and premium office space, should drive significant margin expansion through scale efficiencies. With $30 million in cash—roughly a third of its market cap—and a proven leadership team, Comstock offers an asymmetric opportunity to own a high-quality recurring revenue stream with significant embedded growth at a bargain valuation.
Our focus for the foreseeable future: lending and note investing
Millrose was our primary 2025 focus, as few other opportunities warranted the risk. We are staying nimble, but the current market froth has extended even into smaller market cap REITs. We believe it is more prudent to hold steady than to ignore historical precedents in a market that seems increasingly detached from reality.
Private lending
While we remain active in sourcing mispriced public securities, we have recently rotated a significant portion of our liquidity into short-term private credit. These are first-lien mortgage loans extended to real estate investors, typically featuring a 3–12 month duration. This shift allows us to capture attractive yields—generally 12% interest alongside 2–4 origination points—while maintaining a senior secured position.
Our borrowers typically utilize this capital for “fix-and-flip” projects or to bridge the gap before transitioning into long-term refinancing. We essentially provide the flexible capital necessary to improve an asset’s condition to a bankable state. Because the initial distressed nature of these properties often precludes traditional bank financing, we are able to step into the void and command a premium for our speed and flexibility.
A primary goal of this strategy is capital efficiency—specifically, lending the same dollar twice in one year. By combining our 12% interest rate with two 3% origination fees, we reach an 18% gross yield. I am actively seeking “cradle-to-grave” projects that can be completed rapidly, as increased turnover significantly enhances our returns. If we can achieve three or four turns in a year, our gross yield would scale to 21% or 24%, respectively, which is wonderful.
Note purchasing
A newer focus for us involves marketing to holders of seller-financed notes. These are private individuals who have sold a property and “carried back” a note to finance the buyer’s purchase. Essentially, we are looking to purchase these private mortgages from sellers who would rather receive a lump sum of cash today than collect monthly payments over time.
To illustrate, if a property is sold for $100,000 via seller-financing, the seller might collect a $20,000 down payment and carry back an $80,000 note at an 8% interest rate amortized over 30 years. In this scenario, the seller has successfully divested the asset while retaining a first-lien mortgage note secured by the property as an income-producing instrument.
The opportunity for us lies in the liquidity needs of these holders.
Many noteholders eventually find that they prefer immediate liquidity over a multi-decade stream of small payments. By marketing directly to these individuals, we provide a lump-sum exit in exchange for their mortgage paper.
Because this niche remains highly fragmented and inefficient, we can often acquire notes at a significant discount to the par value of the remaining balance. For example, a note with $100,000 in principal might be purchased for $65,000 or less, significantly enhancing our effective yield.
We are currently focusing on non-judicial states with lender-friendly foreclosure laws to mitigate downside risk. After successfully closing our first acquisition in late 2025, we aim to scale this portfolio in 2026 with a disciplined, value-driven approach.
Summary of our focus moving forward and some market signals
My attention is very much fixed on the downside right now, especially in a time when the market seems incredibly overheated. With the exception of a few short-lived down periods here and there (2020 during lockdowns, 2022, and the recent tariff debacle in 2025), the market has maintained an extraordinary upward trajectory for nearly 17 years.
If history is any indicator of the future, the music will eventually stop. I want us to be in a position to go on offense when this happens, which is why our strategy will revolve around credit as opposed to equity for the foreseeable future.
Below are a few metrics that serve as “flashing red lights” to me, signaling a correction is on the horizon. I have zero clue when it might be, I just know that what goes up must come down.
The Buffett Indicator
This one, named after the famous singer who wrote Margaritaville (or maybe it might have been that Warren guy), takes the ratio between the Wilshire 5000 (a proxy for the entire stock market) and the annualized GDP of the U.S.
As of Q3 2025, it stood at 230%:
The High Yield Spread
The next proxy is the high-yield spread, which is essentially the “risk premium” between U.S. Treasurys and junk bonds. Since Treasurys are considered to be risk-free and junk bonds are considered to be high-risk, this is a good proxy to see how liquid the capital markets are. As is evidenced below, low spreads are almost always followed by spreads blowing out during recessionary periods.
10-Year Returns Following Various P/E Ratios
These data illustrate how the S&P 500’s valuation serves as a roadmap for future returns. The correlation between the starting P/E ratio and 10-year performance is strikingly consistent, with no historical exceptions. This serves as a stark reminder that the entry price is the single most important factor in determining long-term investment success.
To me, these three charts are a call for discipline. In this climate, protecting what we have is more important than chasing marginal gains. While I cannot promise specific returns, I can commit to stewarding your investment with total integrity and to the very best of my ability.
Miscellaneous and K-1s
We are currently looking to expand our capital base and welcome the opportunity to work with new partners. If you are interested in increasing your commitment with us, or if you know others who would benefit from our focus on mispriced opportunities and private credit, please let me know. I am actively looking to grow the business this year and would value any introductions to like-minded investors.
K-1s will be sent to Harvey Capital I LP investors in the next few months, contingent upon the receipt of K-1s from our underlying holdings. I anticipate getting these out sometime in March like we did last year.
Please reach out to me with any questions and our financials will be sent individually to every limited partner. Our next update can be expected around early to mid-July, going over results for the first half of 2026.
I hope you all have a great 2026!
In Christ,
Will Harvey III
IMPORTANT: This communication is for informational purposes only and is intended solely for the general knowledge of the recipient. It does not constitute an offer to sell or a solicitation of an offer to buy any securities, nor shall any securities be offered or sold to any person in any jurisdiction in which such offer, solicitation, purchase, or sale would be unlawful. Any offering of securities will only be made pursuant to confidential offering material and other definitive legal documents, which must be reviewed by the prospective investor.