Alturas Real Estate Fund, LLC - Investment Offering - SBREfunds

Alturas Real Estate Fund

Non-Broker Vetted

Opportunity Overview

  • Asset Type:
  • Strategy Type:
  • Income Type:
    Capital Preservation
  • Minimum Investment:
  • Capital Raised:
  • Target Return:
    9% - 14%

Investment Highlights

  • Performance. The Fund has realized over 20% annualized realized returns since inception. This does not include unrealized gains and tax benefits.
  • Track Record. Using a contrarian investment strategy, the Alturas team has successfully navigated changing real estate markets for the last decade.
  • Diversification. The Alturas Real Estate Fund invests in both residential and commercial real assets geographically focused in the growing metro areas of the Intermountain West and Pacific Northwest

Investment Terms

  • Alturas Capital has an elite team with experience in all aspects of real estate investing, including underwriting and due diligence, property management, construction, development and accounting. The team has a passion for real estate investing, and understands the importance of doing business the right way with a long-term perspective. This unique approach allows for solid, stable investments that produce reliable cash flows, providing value to strategic partners and the communities where it operates.
  • We started Alturas Capital in 2009 by buying distressed residential real estate assets. We created systems to source and screen undervalued properties, and find value-add real estate projects. We based our investment decisions on long-term trends and underlying fundamentals because of the nature of a falling market and uncertain market values.
  • We started buying investment properties for a portfolio of long-term, cash generating assets. In addition to these investments, we also started a construction company that would allow us to have another source of income in the real estate market. These systems, people and investment track record are the foundation of Alturas Capital – a diversified real estate investment management company.
  • Long-term success requires strict adherence to conservative underwriting standards and a thorough analysis of each opportunity. We have been recognized in our market for our thorough, thoughtful and analytical approach to real estate investing.

Asset-Level Information

The Fund intends to create a diversified portfolio of real estate based assets to produce attractive risk adjusted returns. The Fund expects to focus on Assets in Idaho and Utah as well as the Pacific Northwest. To a lesser degree the Fund will consider opportunities throughout the United States on a case-by-case basis. The Fund will seek to spread its risk by investing in multiple geographic areas, asset types, investment structures, investment terms, exit strategies, and investment sizes. The Fund will typically invest in Assets that meet the following general guidelines:

    • Direct Acquisitions: The Fund will acquire commercial, multifamily, and single family properties, with an emphasis in value-add assets, which may include construction and development. The fund will add value to these properties through its rehabilitation, leasing, construction and development activities. Once the projects have been completed, the fund may hold these assets for their long term cash flows, or sell the properties.
    • Asset-based Lending: The Fund will provide loans and other financing to property owners to finance, acquire, construct and/or rehabilitate investment properties. All loans will be for commercial or investment purposes only. No residential owner occupied loans will be originated or acquired. In general, the Fund will invest in assets where the Manager feels confident and comfortable and has experience and expertise with the location, size, property type and/or other characteristics of the real estate. The Manager will rely on its internal valuation methodologies based on broker price opinions, comparable sales, appraisals, prior experience with similar properties, or other means in the sole discretion of the Manager.

The Fund may, but does not intend to, invest in assets with the following real estate characteristics:

  • Raw land with no immediate development potential.
  • Rural locations located outside of main population centers.
  • Assets with no income generating potential.
  • Highly speculative investments where returns are primarily based on price appreciation.

The Fund may make direct acquisition investments, or invest in asset-based loans along with other sponsors, either in a majority or minority position. In these instances, the originating sponsor will be a participant in the investment with its own capital to create alignment of interests. The Manager will determine the criteria for participations in its sole discretion. Unless approved by the Members holding a majority of the outstanding Ownership Interests, direct acquisition investments in which the Fund does not have a controlling interest will not exceed 20% of unreturned capital contributions, based on the cost of the investments, provided that, in the event of a reduction in unreturned capital contributions, the Fund will not be required to dispose of such investments for the purpose of reducing them to 20% or below.

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  • What are the differences between the two investment options?

    Investors lending money to the Fund will be issued Notes and become Note Holders. Note Holders will be lenders to the Fund on a Pari Passu basis with other Note Holders and have a blanket secured interest in the Fund Assets. This secured interest will be in a senior position except in circumstances where individual Fund Assets have been or are being pledged by the Fund to any Credit Facility, as discussed in greater detail below. Note Holders will be issued Notes at interest rates which will vary from time to time, according to a Note Schedule, and initially ranging from 5% to 7%, depending on investment amount and maturity of the Note. The Fund intends to have multiple tiers of rates based on the amount of money lent by the Note Holder and duration of the maturity date. These tiers (including amounts, maturities and rates) may change from time to time at the prevailing interest rate and terms defined on the Note Schedule for a given period. Notes may be purchased at any time during the calendar quarter, subject to approval by the Manager, at the interest rate and terms defined for that period on the Note Schedule. The Fund may prepay the outstanding principal balance and interest to any Note Holder at any time without penalty. Interest to Note Holders will be paid quarterly. The interests of the Note Holders will be represented by a Note Holder Representative, who will initially be the Manager. Note Holders will be issued an IRS Form 1099 annually for any interest received. Investors purchasing ownership interests in the Fund will be issued Membership Units and will become Members. Subject to performance of the Fund and after paying interest and principal due under Credit Facilities, certain Fund Expenses, the Management Fee to the Manager, interest to Note Holders, and repayment of maturing Notes, if any, Members will receive a Preferred Return of 8% per annum on their contributed but unreturned capital. To the extent cash is available after payment of the Preferred Return, Members will also divide with the Manager on a quarterly basis any Excess Distributable Cash with 70% of the amount distributed to the Members and 30% distributed to the Manager. The Preferred Return will be Cumulative, meaning that any shortfall in a given quarter will carry forward, on a non-compounded basis, until paid. After a 24-month Lockup Period, Members may ask the Fund to redeem their Membership Units. Members will be issued IRS Form K-1’s annually for any distributions received and any other tax allocations by virtue of their membership in the Fund.

  • Does the Manager or Sponsor have any skin in the game?

    Yes. The Manager and/or Sponsor will maintain an aggregate investment in the Fund equal to at least 5% of the unreturned capital contributions up to $10,000,000 (i.e., an aggregate investment of at least $500,000 if the Fund has $10,000,000 or more in unreturned capital contributions). In addition, the Manager or Sponsor intend to invest a portion of the EDC from time to time into Units and/or Notes of the Fund on an ongoing basis as long as the Fund is not in liquidation. It is the Manager’s goal and intent to accumulate over time a sizeable investment in Units and/or Notes of the Fund, Pari Passu to all other Investors in whichever instrument is owned. Any further investment by the Manager or Sponsor will be made according to the then current Unit Price and Note Schedule and otherwise be in such form and in such amount as determined by the Manager in its sole discretion. Please see the “CONFLICTS OF INTEREST” section in PPM for more details.

  • What happens to the Fund if the Manager is not around for any reason to manage the affairs of the Fund?

    The Manager recognizes that one of the main concerns of Investors is what would happen in the event the Manager is not available to manage the Fund for whatever reason. Therefore, we have proactively attempted to address and mitigate this concern, including the following:

    • Under the Fund’s Operating Agreement, the Manager is contractually obligated to provide at least one (1) year notice to the Members before being permitted to resign. Members may elect a replacement Manager by majority vote.
    • The Manager intends to be the beneficiary of life insurance policies on the lives of its principals in the minimum amount of $1,000,000 each within 6 months of the Fund’s initial investment. This amount is expected to be sufficient to allow the Manager ample time to procure any necessary replacements without undue duress or financial pressure.
    • The Manager has assembled a team of qualified individuals, each of whom contributes experience and expertise to the overall success of the Manager and to the Fund. The Manager believes the team has the necessary training, talents and skills to continue operating the Fund in the absence of any individual team member.
  • What can Investors expect in the way of transparency and communication?

    Many well developed best practices for corporate governance have been established and promoted by various leading organizations in the fund industry. AMG believes in adhering to industry best practices as much as possible in terms of fund governance, oversight, transparency and communication with Investors. While the Manager has the flexibility to modify its practices over time to meet the needs of the Fund, AMG has endeavored to incorporate best practices into the way it manages the Fund. Among others, AMG accomplishes this objective in the following ways:

    • The Fund’s annual financial statements will be audited by outside CPAs for any year in which the Fund has at least $5,000,000 in unreturned capital contributions as of December 31, or as required by any particular state regulations. The audited financial statements will be available to Investors upon request.
    • The Manager will cause the Fund to have CPA prepared year-end financial statements and tax returns each year which will be available to Investors upon request.
    • The Manager may be removed by a vote of the Members holding at least 80% of the Units, subject to reasonable compensation if it is without cause, at any time during the life of the Fund. The Members will have the ability to elect a replacement Manager by majority vote.
    • The Manager anticipates providing Members with frequent (typically quarterly) qualitative and quantitative information about the Fund along with investment statements and any distributions and/or interest.
    • Meetings will be held a minimum of once per year to provide a forum for Members to ask questions and be heard. Members also have the ability (with a simple majority) to require the Manager to convene a meeting (with appropriate notice) at any time.
    • The Manager has initially engaged Fairway America, LLC to provide the Fund with professional administration in the areas of financial statement preparation, investor subscriptions and redemptions, and other back-office administration functions. Fairway America has the relevant infrastructure, resources and experience that are expected to significantly assist the Fund and Manager in the professional administration of the Fund.
  • How does the Fund make money?

    The Fund will receive as income 100% of any interest collected on Mortgage Loans, 100% of the accrued preferred return from equity transactions, and 50% of all Origination and Extension fees, with the Manager and/or Sponsor receiving the remaining 50%. Additionally, the Fund will receive 100% of any rent collected from Assets owned by the Fund, 100% of any interest collected on deposited funds or receivables owned by the Fund, and 100% of the net sale proceeds in excess of basis on the disposition of any Fund Asset.

  • How does the Manager, Sponsor and/or Affiliates get paid?

    In addition to the 1.5% Management Fee (monthly, annualized) and the appropriate split of any EDC, the Manager, Sponsor and/or Affiliates may receive as income some or all of the following fees which correspond to specific activity centers where the Manager incurs overhead expenses or otherwise would need to hire a third party:

    • In the cases when the Manager is managing a property itself instead of hiring a third party property manager, the Manager will generally charge a Property Management Fee in the range of 3-6% of monthly revenue and which will at all times be commercially reasonable.
    • The Manager may engage one or more Affiliates to perform services on behalf of the fund, such as leasing, general contracting, development and construction oversight and/or management of individual projects, and may charge commercially reasonable fees for performing such services.
    • The Manager and the Fund will split any origination and extension fees actually collected, with 50% going to the Manager and the remaining 50% going to the Fund. When contemplating and creating this fee structure, it has been our intent to only compensate the Manager and/or Affiliates for actual work performed and to align interests with the Fund and the Investors. The Affiliates will be required to commit significant time and resources to perform these functions effectively on behalf of the Fund and any and all compensation for this work is derived from comparable providers of such work. It should be noted that many of these activities could be performed by a third-party whose market pricing serves as a check for us as Manager when considering using Affiliates to make sure these fees are in line with an outsourced option. Because we believe we can control the quality of the work more directly when engaging Affiliates, we feel it is often in the best interest of the Fund that Affiliates perform these functions and that they are to be compensated for that work appropriately.
  • Do I have to pay a commission or load with my investment?

    The Manager will not charge a commission or any load for the purchase of the Units or Notes. However, the Fund may be a party to a Subscription Agreement which pays amounts to Broker/Dealers, financial advisors, or other licensed parties in connection with the sale of Units or Notes. The Manager will endeavor to pay commercially reasonable commissions or loads but will retain sole discretion as to the actual commissions it pays. Any commission or loads actually paid will be considered a Fund Expense and thus borne by the Fund as a whole rather than specific to any particular Investor.

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