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Aif Opportunity Fund


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Aif Opportunity Fund

  1. 1. <ul><li>AIF Opportunity Fund: </li></ul><ul><li>Capitalizing on Undervalued and Undermanaged Real Estate Assets for Long Term Investor Returns </li></ul><ul><li>Fall/Winter 2009 </li></ul>
  2. 2. Opportunity: our name, and our mission <ul><li>The opportunity to acquire real estate projects and related assets at a discount is unprecedented – and may never again happen in our lifetime </li></ul><ul><li>AIF Opportunity Fund, LLC will enable investors to collectively acquire, improve and resell distressed real estate assets for long-term return on investment </li></ul>
  3. 3. In the middle of every difficulty lies opportunity. -Albert Einstein
  4. 4. Roots of opportunity <ul><li>Tight credit has stalled or derailed many good real estate projects </li></ul><ul><li>The market has overreacted: risk aversion has kept even knowledgeable, patient investors on the sidelines </li></ul><ul><li>Vast array of opportunities: raw land, permitted but uninitiated projects, undermanaged or partially completed projects, modest to complete rehabs, even real estate-backed notes can be purchased at good values </li></ul>
  5. 5. Roots of opportunity <ul><li>Individual investors often understand the dynamics, but aren’t in the path of most profitable opportunities </li></ul><ul><li>AIF Opportunity Fund management has access to deals that aren’t widely publicized or are only available in bulk – and has the expertise to evaluate them </li></ul><ul><li>Fund approach allows investor diversification across many opportunities, all vetted by experienced professionals </li></ul>
  6. 6. Opportunity dances with those who are already on the dance floor. - H. Jackson Brown, Jr.
  7. 7. An ideally suited management team <ul><li>AIF Opportunity Fund Manager, LLC, a joint venture of Agricap Financial and Sterling Pacific Financial, will manage AIF Opportunity Fund, LLC </li></ul><ul><li>As long term participants in real estate and agribusiness finance, Agricap and Sterling Pacific are positioned to learn about a wide range of opportunities to acquire discounted assets </li></ul>
  8. 8. An ideally suited management team <ul><li>Agricap and Sterling Pacific bring essential competencies to the task of identifying, evaluating and managing real estate investments, including: </li></ul><ul><ul><li>Extensive real estate market experience (including deep knowledge of the target investment area of the Western US) </li></ul></ul><ul><ul><li>Network of trusted developers, contractors and associates in title, appraisal, and real estate sales </li></ul></ul><ul><ul><li>Real estate finance and project cost analysis expertise </li></ul></ul><ul><ul><li>Project management expertise </li></ul></ul>
  9. 9. About Agricap Financial <ul><li>Agricap Financial Corporation is a diversified financial services company with special expertise in financing for the agricultural, food and produce sectors </li></ul><ul><li>Specialties include receivables financing, seasonal working capital credit, real estate loans, bridge financing and restructuring loans </li></ul><ul><li>Agricap has offices in Los Angeles, Fresno and Monterey, CA </li></ul>
  10. 10. About Sterling Pacific Financial <ul><li>Sterling Pacific Financial is a privately held real estate lending and investment management company operating throughout CA, TX, OR and WA </li></ul><ul><li>Sterling’s activities include identifying above average risk adjusted return loan opportunities, underwriting and servicing, and managing investor participation </li></ul><ul><li>Founded in 1998, Sterling is based in the Santa Cruz area in CA </li></ul>
  11. 11. AIF Opportunity Fund Manager Officers and Directors <ul><li>Richard Kostkas, co-founder and CEO, Agricap Financial Corporation </li></ul><ul><li>Rick Jones, co-founder and President, Agricap Financial Corporation </li></ul><ul><li>Gerald Fischer, CEO, Sterling Pacific Financial </li></ul><ul><li>Joshua Fischer, VP and Managing Director, Sterling Pacific Financial </li></ul><ul><li>Richard Galtelli, VP, Mountain Pacific Leasing, LLC and investment committee member, Sterling Pacific Financial </li></ul><ul><li>Charles Litt, Senior Director, Legal Services, Mountain Pacific Leasing, LLC </li></ul>
  12. 12. Key external professionals <ul><li>Bankers: Comerica Bank </li></ul><ul><li>Auditors: Armanino McKenna LLP </li></ul><ul><li>Legal Counsel: Doss Law LP Powell & Pool LP </li></ul><ul><li>Rawle and Henderson LP </li></ul><ul><li>Dowling, Aaron & Keeler LP </li></ul>
  13. 13. Luck is what happens when preparation meets opportunity - Seneca
  14. 14. Target investments: finding the highest value opportunities <ul><li>Identifying the points at which investment can deliver the greatest return is central to the fund’s mission </li></ul><ul><ul><li>Hard-to-analyze situations like partially executed projects intimidate many investors, and so are often deeply discounted – our team has the expertise to capitalize on these situations </li></ul></ul>
  15. 15. Target investments: finding the highest value opportunities <ul><li>The credit crisis has affected projects in all stages – at any bank refinancing point, a project could falter, regardless of upside or management performance </li></ul><ul><ul><li>In some cases, a small added investment could complete a project or improve its value dramatically </li></ul></ul><ul><ul><li>Restructuring, retiming and recapitalizing the project can dramatically alter the return </li></ul></ul>
  16. 16. Target investments: finding the highest value opportunities <ul><li>Buying in bulk: often, some of the most discounted properties are available only as part of bulk purchases – operating as a fund allows access to these less-publicized, high potential assets </li></ul>
  17. 17. Looking beyond the obvious <ul><li>Completion of projects to retail sale stage may not be highest return on investment </li></ul><ul><ul><li>Sometimes highest return is to advance a project incrementally, then sell to developer </li></ul></ul><ul><ul><li>Legal processes such as entitling and permitting are low cost, but can increase resale value of land significantly </li></ul></ul>
  18. 18. Case study: opportunity walks through Sterling’s door <ul><li>Developer in fast-growing Austin, facing foreclosure, came to Sterling Pacific to request collateral-based financing for a four building condominium project </li></ul><ul><ul><li>Ideally located: near a college and a medical school </li></ul></ul><ul><ul><li>Project stalled at rezoning stage </li></ul></ul><ul><li>Deal parameters didn’t meet Sterling’s lending guidelines, but the project’s potential intrigued Sterling’s management </li></ul><ul><li>Sterling proposed a purchase by AIF Opportunity Fund – helping the developer avoid foreclosure, and giving the fund an attractive project at a deep discount </li></ul>
  19. 19. Austin Condominium project: An ideal match for the AIF Opportunity Fund <ul><li>Developer lacked both financial resources and experience to navigate the current credit climate </li></ul><ul><ul><li>AIF Opportunity Fund’s team and network of trusted professionals have the needed skills and experience </li></ul></ul><ul><li>Especially attractive: multiple exit points for investor upside </li></ul><ul><ul><li>Possible to sell after re-zoning, after plan approval, or after additional investment in build-out </li></ul></ul><ul><ul><li>Minimum return conservatively projected at 20% </li></ul></ul>
  20. 20. Deal sources <ul><li>Mortgage lenders / banks </li></ul><ul><li>Foreclosure sales </li></ul><ul><li>REO and conventional brokers </li></ul><ul><li>Troubled property owners </li></ul><ul><li>Collections attorneys </li></ul><ul><li>Other professionals in the real estate and lending community </li></ul>
  21. 21. Lending capabilities expand the fund’s options <ul><li>Besides acquiring, improving and selling assets, AIF Opportunity Fund will selectively invest in real estate notes </li></ul><ul><ul><li>Typically non performing notes purchased at deep discounts from face value </li></ul></ul><ul><li>Restructuring troubled notes provides cash flow back to the fund, which can be reinvested and will supplement investor ROI from long-term asset growth </li></ul>
  22. 22. Lending capabilities expand the fund’s options <ul><li>Assets can be sold at the stage that delivers maximum ROI, even when conventional financing would be impossible </li></ul><ul><li>For example, raw land that has been acquired and entitled may have high value for a developer – but, that type of project might not qualify for conventional financing </li></ul><ul><ul><li>Fund can sell the property to a developer at a profitable price – with the fund providing bridge financing at a premium rate </li></ul></ul>
  23. 23. Opportunity is missed by most people because it is dressed in overalls and looks like work. - Thomas Edison
  24. 24. AIF Opportunity Fund activities <ul><li>Identify and evaluate real estate investment opportunities, selecting those that provide highest potential for return on investment </li></ul><ul><li>Hire and oversee developers, contractors, property managers and other professionals to operate acquired properties or improve them for resale </li></ul><ul><li>Acquire outside expertise as needed from lawyers, appraisers, title specialists and other professionals </li></ul>
  25. 25. AIF Opportunity Fund activities <ul><li>Underwrite and arrange for servicing of mortgage loans </li></ul><ul><li>Market and sell fund-owned properties </li></ul><ul><li>Report and distribute earnings to shareholders </li></ul>
  26. 26. Opportunities are never lost – they are taken by others. - Unknown
  27. 27. Investor distributions <ul><li>In any year when operating profits exist and cash flow needs permit, a preferred return of up to 9% will be paid to investors </li></ul><ul><ul><li>This yield may be reinvested automatically if desired </li></ul></ul><ul><ul><li>The fund manager may determine not to distribute returns if doing so would undermine management of the fund’s property assets </li></ul></ul><ul><ul><li>All returns are paid proportionately to investors, based on their percentage ownership of the fund </li></ul></ul><ul><li>Any returns exceeding 9% will be shared 50/50 between the investors in the fund and the fund manager </li></ul>
  28. 28. Investment goals <ul><li>AIF Opportunity Fund aims primarily for long-term investor returns </li></ul><ul><ul><li>In some cases, best investor returns will come from holding assets over a period of years, rather than liquidating for short term gain </li></ul></ul><ul><li>Investors should be prepared to leave their investment in place for at least 36 months (after which funds can be withdrawn with 90 days notice, in four increments over a one-year period) </li></ul>
  29. 29. Tax advantages <ul><li>As LLC members, all investors will share any tax advantages of the fund’s investments </li></ul><ul><ul><li>Depreciation is shared proportionately by members </li></ul></ul><ul><ul><li>Any tax losses also pass through to investors </li></ul></ul><ul><li>Investors should consult their own CPAs or other advisors to accurately assess impact on their individual tax situation </li></ul>
  30. 30. Who can invest? <ul><li>Any accredited investor can invest, based on the national standard </li></ul><ul><ul><li>For individuals, either $200,000 annual income for each of the prior two years, or net worth of $1,000,000 </li></ul></ul><ul><ul><li>Corporations and organizations must also meet suitability standards (e.g., in some cases, all equity holders must be accredited) </li></ul></ul><ul><ul><li>In general, investors must have no immediate need for investment liquidity, and must have sufficient other funds to meet all their contingencies </li></ul></ul><ul><ul><li>Complete standards in Private Placement Memorandum </li></ul></ul>
  31. 31. Who can invest? <ul><li>Real estate tax issues may apply for IRAs, Keoghs, 401(k)s, Coverdell accounts, and other tax-advantaged arrangements </li></ul><ul><ul><li>While these entities may invest, we encourage first seeking advice from a CPA familiar with the specific tax situation </li></ul></ul>
  32. 32. Investor protections <ul><li>Our fund structure considers and aims to address many potential investor risks through policies like lending standards and insurance requirements, by outlining processes for disposing of fund assets, and other terms. </li></ul><ul><ul><li>Full terms are outlined in the Private Placement Memorandum, which all potential investors should read thoroughly </li></ul></ul><ul><li>Our fund will be audited annually by an independent accounting firm on behalf of investors </li></ul>
  33. 33. Management compensation and fees <ul><li>Manager will earn a performance fee of 50% of all returns in excess of the 9% cumulative preferred return </li></ul><ul><li>The fund manager will also receive an annual management fee of 2% of total assets under management </li></ul><ul><li>Additionally, the manager may be compensated ( at no more than market rates) for services that would otherwise be outsourced, such as real estate and other asset sales, loan origination fees for new and purchased notes, and sales of fund shares </li></ul><ul><ul><li>A complete list of fees appears in the Private Placement Memorandum </li></ul></ul>
  34. 34. Request detailed investor information <ul><li>If you’d like to learn more about investing in the AIF Opportunity Fund, request our Private Placement Memorandum by: </li></ul><ul><li>phone: 877-785-2954 </li></ul><ul><li>email: [email_address] </li></ul>
  35. 35. If a window of opportunity appears, don’t pull down the shade. - Tom Peters