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SUBSCRIPTION AGREEMENT
OPERATING AGREEMENT
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RIVEROAK REALTY FUND III, LLC REQUEST FOR OFFERING MEMORANDUM
AND STATEMENT AS TO ACCREDITED STATUS
The following information is required by the Securities
Act of 1933 before access is permitted to the Offering Memorandum
Full Name
Address (Street, City, State, Zip)
Date of Birth
Email Address
I am qualified to invest as an accredited investor by reason of at
least one of the following (check at least one item that applies):
My net worth (either individually or with my spouse), including homes,
investments and all property and other assets, is at least $1,000,000.
My individual annual income was at least $200,000 in each of the
two most recent years, and I expect such income in the current year.
My annual income jointly with my spouse was at least $300,000 in each of the two most
recent years, and I expect such income in the current year.
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EXECUTIVE SUMMARY
Business Overview
The Fund has been formed by the Managing Member to provide high
net-worth individuals, corporations, small pension funds, Individual
Retirement Accounts, self-directed 401-Ks, SEP's, and endowments
access to professionally managed real estate investments. Stephen
DeNardo ("Mr. DeNardo") and George Yerrall ("Mr.
Yerrall"; together with Mr. DeNardo, the "Operating
Principals") are the operating principals of the Managing
Member who will manage all aspects of the Fund's business. The
Operating Principals have extensive experience in all phases
of real estate investment sourcing, acquisition, management and
financing. The Fund will focus on multi-family residential, office
and retail properties located in the Boston to Washington, DC,
corridor (the "Investment Territory"). Other than the
compensation and benefits paid by the Managing Member to the
Operating Principals and other employees of the Managing Member
(a portion of which shall be reimbursed by the Fund to the Managing
Member), and the incentive promote payable to the Managing Member
as set forth in the LLC Agreement (as hereinafter defined), no
management fees, organization fees, acquisition fees, disposition
fees or other fees will be charged to the investors by the Managing
Member or its affiliates. The total remuneration for the Operating
Principals will be derived from such compensation and benefits,
which (as it relates to the Fund) are subject to Advisory Board
(as hereinafter defined) review, and from their share (directly
or through the Managing Member) of proceeds from the Fund's business,
including the foregoing mentioned incentive promote. Any fees
earned by the Fund from the operation of the Fund's business
will be included in the revenue of the Fund.
The Fund's strategy will be to invest in niche opportunities
in the Investment Territory in:
-Distressed assets with compelling value-added opportunities;
-Small-cap developments in supply restricted neighborhoods;
-Unique assets with strong upside potential;
-Properties in good locations with existing cash flow; and
-Real estate related operating and service companies.
-The Fund will take a balanced approach to maximizing risk-adjusted
returns and long-term capital appreciation. Assets are expected
to be held three to five years.
The Fund will invest primarily in (i) smaller properties (less
than $20 million) and (ii) complex situations requiring significant
asset management experience where operating results and cash
flow can be improved. The market for these assets is relatively
inefficient and is hard to access for private investors. The
Operating Principals, however, have extensive experience with
this market.
Investment Highlights
Management Commitment. The Managing Member will purchase
interests in the Fund in a minimum amount of 1% of the total
capitalization in the Fund, provided, however, such investment
may be structured either by the Managing Member investing in
the Fund as a Nonmanaging Member (defined below) or by the principals
of the Managing Member investing in the Fund as individual Nonmanaging
Members.
Investor Returns. The goal of the Fund is to return
all capital plus an internal rate of return ("IRR")
of 13-15% on that capital by the time the Fund is liquidated.
As an added feature, the members of the Fund other than the Managing
Member (the "Nonmanaging Members") will be entitled
to a preferred return on capital contributions made to the Fund
of 8% compounded annually for the amount of time such capital
contributions are outstanding (the "Preferred Return").
This amount is earned by all Nonmanaging Members on each investment
of the Fund before any distribution to the Managing Member with
respect to that investment. In addition, upon liquidation of
the Funds, there will be a "look back" calculation
of the Preferred Return on all contributed capital for the amount
of time such capital contributions are outstanding.
Market Knowledge and Experience. Mr. DeNardo and
Mr. Yerrall are quite familiar with the markets of the Investment
Territory. The Operating Principals have acquired, managed, underwritten,
developed or provided capital with respect to over 15 million
square feet of real estate in the Investment Territory.
Access for Private Investors. Private investors,
due to factors such as a scarcity of time, personal capital,
experience or expertise, seldom find opportunities to invest
in sizeable real estate transactions alongside professional real
estate investment managers who have personal capital at risk.
Unlike large institutional funds that require investment minimums
of approximately $10 million, the Fund provides access to a professionally
managed real estate investment vehicle for individuals and small
institutions with all parties' interests being aligned.
Differentiation. The Fund will focus on real estate investments
that maximize capital appreciation. These investments are unlike
Real Estate Investment Trusts ("REITs"), which emphasize
an income approach to a capital-intensive business. REITs (i)
are subject to risks of the securities markets adding an element
beyond the fundamentals of basic real estate risk and (ii) bear
the burden of securities registration, public reporting and the
costs associated with being a publicly traded company.
The Fund is also different from an opportunity fund. Besides
the lack of access for most investors, opportunity funds are
high-risk ventures, in which tremendous stress is placed on transactions
in the pursuit of extremely high rates of return. Time is an
important factor in the calculation of the applicable IRR for
these ventures. A missed estimate or a slow-down in the marketplace
of just six months an extremely short period in real estate
terms can have a devastating affect on the rate of return.
While the Fund will respect the importance of the overall return
to its Nonmanaging Members, it will remain focused on managing
real estate fundamentals using a balanced approach to risk and
return.
No Fees Paid To Managing Member. Other than the
compensation and benefits by the Managing Member to the Operating
Principals and other employees of the Managing Member (a portion
of which shall be reimbursed by the Fund to the Managing Member),
and the incentive promote payable to the Managing Member as set
forth in the LLC Agreement, no management fees, organization
fees, acquisition fees, disposition fees, or other fees will
be charged to the investors by the Managing Member or its affiliates.
The total remuneration for the Operating Principals and such
other employees will be derived from such compensation and benefits
(the reimbursement of which, with respect to the Fund, are subject
to Advisory Board review), and from their share (through ownership
interests in the Managing Member) of the foregoing mentioned
incentive promote. Any fees earned from the operation of the
business will be included in the revenue of the Fund. The Fund,
however, will be responsible for payment of its own expenses
including sales expenses paid to third parties and will reimburse
the Managing Member for any expenses (including the compensation
and benefits of the Operating Principals and other employees
of the Managing Member) advanced on its behalf.
Fees Paid to Third Parties. Notwithstanding anything to
the contrary, the Fund may pay fees to third parties for the
referral of investors who become Nonmanaging Members.
Alignment of Interests. Nonmanaging Members are
investing with managers whose interests are aligned with each
other:
-The Managing Member is (through an investment as a Nonmanaging
Member) making a substantial investment of its own capital into
the Fund, such capital will be returned on a pari-passu
basis with the other Nonmanaging Members.
-There is no separate fee revenue of any kind that flows to the
Managing Member.
-The Managing Member's incentives are dependent upon the return
of capital plus the Preferred Return with respect to each investment
to the Nonmanaging Members before any distribution is made to
the Managing Member on an incentive basis.
-The Managing Member is not entitled to any "catch-up"
provisions that are common to many other real estate funds. |
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