The Strategic Asset Fund
ELP Capital Advisors LLC
401 Court Reno, Nevada 89501-1708
Main (775) 283-5363 | Toll Free (866) 939-6466
ELP Capital Advisors LLC
ELP Capital and the Strategic Asset Fund
Introduction, Overview and Summary
ELP Capital Inc. is a Nevada-based company that specializes in private trust deed financing and investments, bridge and short-term commercial
lending. ELP’s Executive Management Team has an average tenure of over 22 years experience through several business cycles in commercial
real estate, banking, and portfolio management. Led by CEO Tom Powell, the Company’s Board of Advisors includes a team of professionals
including two Ph.D.s and a former chairman of the Federal Home Loan Bank of San Francisco. ELP’s success is directly attributable to the depth
and strength of ELP’s management and board who enable the company to quickly evaluate projects for financing and investment in a competitive
and fast moving environment.
The investment objective of the ELP Strategic Asset Fund is to provide investors with consistent long-term returns targeting a 12%+ average
annual ROR in both up and down markets with a high-level of security and safety of principal. The Fund accomplishes this by making first and
senior deed of trust commercial mortgage loans to real estate owners and developers, who have short-term and bridge finance needs that may
not be served by traditional lending institutions. Investors have the option of receiving a monthly dividend or reinvestment for maximum capital
The Fund’s strategy primarily focuses on real estate loans
and development loans for select commercial projects.
The mortgage loans are typically interest-only, short-term
loans ranging from six months to three years and carry
high interest rates, often 5 to 10 points above the prime
rate with additional points charged up-front. They are
typically full recourse loans secured by personal property
guarantees and first mortgage liens on real estate with a
conservative loan to value ratio averaging 40-50%. The
primary factors in ELP’s underwriting mortgage loans will
be the loan to value ratio of the security collateral, along
with the borrower’s integrity, business experience and
capability, as well as credit history. This valuation method
is highly conservative and rarely translates into losses
as the lender has recourse to recover their investment
capital by liquidating the properties pledged by the borrower to secure the loan. The Fund generally expects to limit the amount of its investment
in any single loan or in loans to one borrower and related persons to 10% of its total assets, although the Fund’s board has approved exceptions
at inception and on a case-by-case basis thereafter.
Why this Asset Class is Important
Modern portfolio theory demonstrates that diversification improves long-term returns while reducing risk. With long term returns in stocks
averaging about 10% as represented by the S & P 500 and 8% for lower grade corporate bonds, it worth considering a less liquid asset class
that offers higher returns while providing stable value and a low price beta. Non-rated secured real estate debt is an important asset class that
has the unique qualities of providing potentially higher returns with lower risk relative to low grade corporate bonds. Because a short duration
portfolio of real estate debt can perform well in all interest rate environments, investors who can sacrifice some liquidity may want to consider
including this asset class and seek a diversified way to do so. The ELP Strategic Asset Fund provides just such a diversified vehicle being made
up of short-term secured senior deed of trust loans that provide high returns with relative safety of principal. In short, ELP provides an easy way
to gain exposure to this important sector.
50-year Dow Industrials Performance 10-year Dow Industrials Performance
The Stock Market has delivered long-term returns of about 10% annually, but performance has varied and been punctuated by flat returns over extended periods of time, such
as the 15 years between 1965 and 1980, and the last 10 years between 1998 and 2008 when returns were zero to low single digits.
Why ELP and What Makes the
Strategic Asset Fund Different
ELP’s area of finance and investment expertise falls in the hard asset mortgage lending category. What differentiates ELP from other “hard
money” lending and investment firms is our philosophy—what we call the Four Cs: Character, Capacity, Capability and Collateral. Many hard
money lenders focus only on collateral and may even welcome foreclosure and forced forfeiture of property pledged by the borrower at deep
discount to market value. In contrast, ELP’s strategy is to lend to parties of high integrity and experience who have the character, capability and
capacity to see their projects through to completion. As fund manager, ELP evaluates a borrower’s financials, focusing on net worth, portfolio
of assets, historical performance, and credit history to confirm the financial strength and track record of the borrower in the particular venue of
proposed real estate project. ELP typically eliminates more than 75% of the requests for funding on a first screening, then applies rigorous due
diligence that generally leads to closing less than 10% of the remaining pool under consideration.
= Consistant High Returns with Relative Safety
While pledged collateral is a quantitative variable that provides insurance against loss of principle, we focus more attention on the qualitative--
the other three Cs of the borrower. Our experience and judgment about the character, capability and capacity of our borrowing partners is what
makes the ELP process different. We don’t have to hit home runs, but we never want to strike out. Our many years of experience have made it
clear that the most important single success factor is the character of the counterparties to whom we provide financing. Staying true to our Four
C philosophy enables us to stay focused on uncovering and quickly securing new project opportunities in a dynamic environment rather than
being preoccupied with workouts and legal action.
Providing flexible terms is also important to our investors. ELP distinguishes itself from the competition by providing our investors liquidity.
In contrast to most of our competitors who finance individual projects with investor funds that must be tied up for the duration of the loan, the
Strategic Asset Fund is designed to provide exposure to a diversified pool of loans with quarterly liquidity after the first year of investment. The
Strategic Asset Fund is structured to provide the investor the option of reinvesting or taking a monthly dividend of 8% annualized with additional
capital growth of principle invested targeting a 12+% total annual return.
Why Now is an Opportune Time for
The ELP Strategic Asset Fund
The credit crisis that began in 2007 and accelerated in 2008 brought a halt
to the securitization of loans and precipitated an enormous contraction of
commercial lending by traditional banking institutions. Because this condition
is likely to persist for several years, the window of opportunity has opened
wide for ELP. And even in the face of a weak overall economy, ELP is seeing
more deal flow and increasing commercial projects in need of financing. The
competition from other non-traditional lenders, such as insurance companies
and hard money lenders remains, but with more opportunities for all. As a
result, ELP is well-positioned to go upstream in the quality of the real estate
asset and the owner/developer. In 2009 ELP expects to see and evaluate more
top-tier projects with tenant diversity, a broad-based surrounding economy and
property fungibility than at any time in recent memory. Now may be the most
opportune time in decades for new investments and growth in this unique asset
class. With setbacks and uncertainty of returns in the traditional areas of stocks
and bonds, investors would do well to evaluate and take advantage of the ELP
Strategic Asset Fund.
Commercial Real Estate Lending Trends From Q3 2007 to Q3 2008 there was a decline of 53% in Commercial
Real Estate Lending Volume. Break out by category is as follows:
When compared to the 3rd quarter of 2007, the overall 53% decrease
in commercial/multifamily lending activity included:
87% decrease in loans for hotel properties,
61% decrease in loans for office properties,
59% decrease in loans for health care properties,
39% decrease in loans for industrial properties,
30% decrease in multifamily property loans,
30% decrease in retail property loans.
Q3 2007 Q3 2008 Projected Q3 2009
The market for CMBS -- packages of pooled loans backed by mortgages
on office buildings, industrial properties, malls and other retail cen-
Commercial Real Estate Securitization Trends ters, and apartment buildings -- has been ravaged by market condi-
tions since last fall. In the first six months of 2007, 39 deals totaling
$137 billion were brought to market and successfully sold, from the
highest rated (triple-A) bonds down to the riskier, higher-yielding and
lower-rated classes of bonds called B-pieces. Through mid-July 2008,
only nine deals totaling $12.1 billion have been completed, a drop in
issuance of more than 90%. No CMBS deal has been completed since
a $1.27 billion offering from Banc of America Securities on June 19.
There are currently no CMBS deals on the books.
This is the most attractive time since the 1930’s to find attractive low
Q2 2007 Q2 2008 Projected Q2 2009
loan to value opportunities.
Source: Mortgage Bankers Association
TOM POWELL, Chief Executive Officer
Tom Powell is Chief Executive Officer of ELP Capital since the company was founded in 1999. As chief strategist Mr. Powell has combined his education and experience
in commercial and retail banking, mortgage banking, real estate development, and corporate finance and governance to successfully lead the company through several
market growths and contractions. Mr. Powell also serves as the company’s Chief Investment Officer, helping to identify and structure investment vehicles creating solid
investment options for ELP Capital Advisors’ family of Funds, institutional investors, and individual project investors.
Mr. Powell began his banking career with Wells Fargo Bank in 1988 and served as Vice President until relocating to Reno in 1992. Over the next several years Mr. Powell
served as Vice President for three mortgage companies, First California Mortgage, The Hammond Company, and DMR Mortgage Services before starting IntoHomes
Mortgage Services – the catalyst for ELP Capital.
JESSE HAW, Principal / Director
Jesse Haw is President of Hawco Properties and Principal / Director of ELP Capital, Inc. For Nevada Security Bank, Jesse is a Director of the bank and its parent company
The Bank Holdings, is the Governance Chair, and serves on the Directors Loan Committee and Executive Committee.
ROBERT BARONE, Principal / Director
With over 30 years experience in the financial industry, Bob Barone is Chairman of Ancora West Trust Company and Principal / Director of ELP Capital, Inc. A past
professor of Economics at the University of Nevada, Barone is also the past Chairman and CEO of Comstock Bancorp. Barone has helped take three companies public
during his career. He is a the Immediate Past Chairman of Federal Home Loan Bank of San Francisco.
GREG HUGHES, President
As President of ELP Capital, Inc. Greg brings 20+ years of experience in managing and leading his own companies. He brings his strengths to the business by integrating
structure and systems into finance, marketing, sales, and strategic planning. He understands how to evaluate properties for investment and/or business purchase
needs through his solid understanding of cash flows, P&Ls and balance sheets. Greg has been an entrepreneur since age 15 when he started a lawn service company
and through successful mergers & acqu