Mission Statement:
To Provide Liquidity to Distressed Real Estate Brought About By the Credit Crisis, and Create a Lucrative Investment Opportunity for Assets that are Artificially Undervalued Due to Poor Economic Times and a Tight Credit Environment, with Transactions Structured with Maximum Flexibility to Fairly Allocate Returns Based Upon the Level of Risk Assumed by the Investor.
Investor Criteria:
In order to participate you must be an accredited investor, which by definition is a person with income exceeding $200,000 in each of the two most recent years or joint income with a spouse exceeding $300,000 for those years and a reasonable expectation of the same income level in the current year, or a person who has individual net worth, or joint net worth with the person’s spouse, that exceeds $1 million at the time of the purchase.
Purpose:
Due to the mortgage and credit crisis of 2007, and the backlash from regulators regarding capital concerns, banks and other financial institutions have substantially tightened their lending guidelines. Many properties that were very “bankable” in previous years are now being turned away, creating a liquidity crisis in many sectors of the real estate market. This liquidity crisis is putting a huge burden on some borrowers, who are being forced to liquidate into a market with very few cash buyers, which is creating some very desirable purchase opportunities for buyers with cash.
Objectives:
Invest in distressed assets with 1) substantial value enhancement potential, or 2) assets with limited supply providing inherent value (such as waterfront, ski slope or golf course frontage, next tier commercial or other key sites), or 3) properties that can be acquired substantially below their economic value or replacement cost, and can be readily value enhanced or otherwise held and sold as the market recovers at a substantial profit to the Investors.
Sponsor/General Partner: WA Investment, LLC, as structured by Watson Advisors.
Investment Overview/Criteria
* A Buyer’s Market - Substantial returns are realized through buying assets during tight liquidity and credit markets, and rare periods when real estate asset investments are out of favor and are artificially undervalued. We have not realized such a strong buyer’s market since the mid to late 80’s, and substantial equity gains will be realized through troubled asset purchases during the next 12 to 24 months.
* Investing in Quality - Invest in assets with substantial value enhancement potential, assets with limited supply providing inherent value (such as waterfront, ski slope frontage, next tier commercial or other key sites) or properties that can be acquired substantially below their economic value or replacement cost, and can be readily value enhanced or otherwise held and sold as the market recovers at a substantial profit to the Investors.
* Optimizing Leverage - An analysis will be done to determine the optimal amount of leverage to maximize returns with an acceptable level of risk (i.e. Income properties with reasonably predictable income would carry a higher level than developed lots, which could carry more debt than raw land). Debt levels are anticipate at the following levels:
o Income Properties – 50% to 75%
o Developed Lots – 35% to 65% (depending on marketability)
o Raw Land – 25% to 50% (depending on cash available for interest & expense carry)
* Predefined Investment Criteria - Numerous properties will be analyzed as to price vs. economic or replacement value, cash required, market potential, risk involved, etc, and only the very best investments will be acquired. Specific criteria are as follows:
o Those properties with substantial upside, that have an IRR potential of 30% or more, and with minimal additional investment
o Properties that can be acquired at 60% or less of economic or replacement value
o Investments requiring a low level of cash investment with a fairly definable ability to carry through a reasonable disposition period
Investment Structure:
* Custom Investment Options -A tiered investment opportunity that provides a flexible structure to allow an investor to chose their desired level of risk and return.
* Limited Investors – A particular class of investor who will put up all of the required cash for the transaction, and will receive a cumulative, preferred return of 8%, a 1st out position, and 40% of the net profits.
* Financial Investors - Another investment class who will not be required to put up any cash, but will personally guarantee the debt for 40% of net profits. Some Investors will chose to be both a cash, (Limited Investor) and a Financial Investor willing to personally guarantee debt, in order to participate in a larger share of the returns.
* Limiting Liability Exposure - Debt will be negotiated to limit liability to 125% of the investor’s prorata portion of the debt, to quantify potential exposure and provide an efficient debt structure to not tie up a disproportionate share of the Investor’s credit on any one deal.
* Professional Management - The General Partner (GP) role will be fulfilled by Watson Advisors through WA Investments, LLC, and will receive 20% of net profits for putting the transactions together and managing the investment. The GP will have full responsibility and authority to execute the defined business plan established at the time of investment, and to develop, redevelop and dispose of the properties without further approval of the Limited or Financial Investors.
* Predefined Cost Structure - For purely speculative investments that require no further involvement, the GP will be compensated strictly through the net profits percentage. Value enhancement or management intensive projects will carry a development or management fee commensurate with the amount of work involved. Investors will have the ability to understand any fees prior to investing. All costs, such as legal, accounting, planning, etc. will be borne by the project.
* Structuring for Safety & Diversification - Each property will be acquired under a separate LLC (WA1, WA2, WA3, etc.), with the three Investment tiers outlined above, clearly defined within each entity. This will provide some legal protection in the event that a particular asset has a legal problem, and will prevent having the other investments infected by legal problems with one asset. In order to create diversification, investors are encouraged to spread their investment over multiples of these LLC’s and multiple geographic locations, rather than putting more money into just one investment or just one market. Investments will be highly insured to cover potential liabilities.
* Investment “Right Sizing” - Individual investments will be in the range of $250,000 to $1,000,000, unless related smaller investments can be pooled under one entity (such as buying multiple condos in the same project from different buyers and pooled under a single investment entity), and investment unit sizes will begin at $50,000 per investment, and all Investors must be Qualified Investors (income over $200,000, $300,000 if married, and/or a net worth in excess of $1 million).
* Predefined Business Plan - All development, redevelopment and carry costs will be outlined in advance in a defined business plan, and substantial changes to that plan will be reported and approved by the Investors. Otherwise the GP will have full authority to act on behalf of the LLC to maximize returns.
* Standardized Reporting - Quarterly reports will be prepared on each asset to keep investors fully informed as to the status and progress of the investment, and taxes will be filed and K-1’s delivered to Investors on or before March 31st of the following year.
* Lender Requirements - Financial Partners will commit to continue to provide financial statements and tax returns to keep the lenders informed as to their ongoing financial condition, and to provide the lenders the ability to keep their credit files current.
Below is a visual representation of the investment structure:
To Provide Liquidity to Distressed Real Estate Brought About By the Credit Crisis, and Create a Lucrative Investment Opportunity for Assets that are Artificially Undervalued Due to Poor Economic Times and a Tight Credit Environment, with Transactions Structured with Maximum Flexibility to Fairly Allocate Returns Based Upon the Level of Risk Assumed by the Investor.
Investor Criteria:
In order to participate you must be an accredited investor, which by definition is a person with income exceeding $200,000 in each of the two most recent years or joint income with a spouse exceeding $300,000 for those years and a reasonable expectation of the same income level in the current year, or a person who has individual net worth, or joint net worth with the person’s spouse, that exceeds $1 million at the time of the purchase.
Purpose:
Due to the mortgage and credit crisis of 2007, and the backlash from regulators regarding capital concerns, banks and other financial institutions have substantially tightened their lending guidelines. Many properties that were very “bankable” in previous years are now being turned away, creating a liquidity crisis in many sectors of the real estate market. This liquidity crisis is putting a huge burden on some borrowers, who are being forced to liquidate into a market with very few cash buyers, which is creating some very desirable purchase opportunities for buyers with cash.
Objectives:
Invest in distressed assets with 1) substantial value enhancement potential, or 2) assets with limited supply providing inherent value (such as waterfront, ski slope or golf course frontage, next tier commercial or other key sites), or 3) properties that can be acquired substantially below their economic value or replacement cost, and can be readily value enhanced or otherwise held and sold as the market recovers at a substantial profit to the Investors.
Sponsor/General Partner: WA Investment, LLC, as structured by Watson Advisors.
Investment Overview/Criteria
* A Buyer’s Market - Substantial returns are realized through buying assets during tight liquidity and credit markets, and rare periods when real estate asset investments are out of favor and are artificially undervalued. We have not realized such a strong buyer’s market since the mid to late 80’s, and substantial equity gains will be realized through troubled asset purchases during the next 12 to 24 months.
* Investing in Quality - Invest in assets with substantial value enhancement potential, assets with limited supply providing inherent value (such as waterfront, ski slope frontage, next tier commercial or other key sites) or properties that can be acquired substantially below their economic value or replacement cost, and can be readily value enhanced or otherwise held and sold as the market recovers at a substantial profit to the Investors.
* Optimizing Leverage - An analysis will be done to determine the optimal amount of leverage to maximize returns with an acceptable level of risk (i.e. Income properties with reasonably predictable income would carry a higher level than developed lots, which could carry more debt than raw land). Debt levels are anticipate at the following levels:
o Income Properties – 50% to 75%
o Developed Lots – 35% to 65% (depending on marketability)
o Raw Land – 25% to 50% (depending on cash available for interest & expense carry)
* Predefined Investment Criteria - Numerous properties will be analyzed as to price vs. economic or replacement value, cash required, market potential, risk involved, etc, and only the very best investments will be acquired. Specific criteria are as follows:
o Those properties with substantial upside, that have an IRR potential of 30% or more, and with minimal additional investment
o Properties that can be acquired at 60% or less of economic or replacement value
o Investments requiring a low level of cash investment with a fairly definable ability to carry through a reasonable disposition period
Investment Structure:
* Custom Investment Options -A tiered investment opportunity that provides a flexible structure to allow an investor to chose their desired level of risk and return.
* Limited Investors – A particular class of investor who will put up all of the required cash for the transaction, and will receive a cumulative, preferred return of 8%, a 1st out position, and 40% of the net profits.
* Financial Investors - Another investment class who will not be required to put up any cash, but will personally guarantee the debt for 40% of net profits. Some Investors will chose to be both a cash, (Limited Investor) and a Financial Investor willing to personally guarantee debt, in order to participate in a larger share of the returns.
* Limiting Liability Exposure - Debt will be negotiated to limit liability to 125% of the investor’s prorata portion of the debt, to quantify potential exposure and provide an efficient debt structure to not tie up a disproportionate share of the Investor’s credit on any one deal.
* Professional Management - The General Partner (GP) role will be fulfilled by Watson Advisors through WA Investments, LLC, and will receive 20% of net profits for putting the transactions together and managing the investment. The GP will have full responsibility and authority to execute the defined business plan established at the time of investment, and to develop, redevelop and dispose of the properties without further approval of the Limited or Financial Investors.
* Predefined Cost Structure - For purely speculative investments that require no further involvement, the GP will be compensated strictly through the net profits percentage. Value enhancement or management intensive projects will carry a development or management fee commensurate with the amount of work involved. Investors will have the ability to understand any fees prior to investing. All costs, such as legal, accounting, planning, etc. will be borne by the project.
* Structuring for Safety & Diversification - Each property will be acquired under a separate LLC (WA1, WA2, WA3, etc.), with the three Investment tiers outlined above, clearly defined within each entity. This will provide some legal protection in the event that a particular asset has a legal problem, and will prevent having the other investments infected by legal problems with one asset. In order to create diversification, investors are encouraged to spread their investment over multiples of these LLC’s and multiple geographic locations, rather than putting more money into just one investment or just one market. Investments will be highly insured to cover potential liabilities.
* Investment “Right Sizing” - Individual investments will be in the range of $250,000 to $1,000,000, unless related smaller investments can be pooled under one entity (such as buying multiple condos in the same project from different buyers and pooled under a single investment entity), and investment unit sizes will begin at $50,000 per investment, and all Investors must be Qualified Investors (income over $200,000, $300,000 if married, and/or a net worth in excess of $1 million).
* Predefined Business Plan - All development, redevelopment and carry costs will be outlined in advance in a defined business plan, and substantial changes to that plan will be reported and approved by the Investors. Otherwise the GP will have full authority to act on behalf of the LLC to maximize returns.
* Standardized Reporting - Quarterly reports will be prepared on each asset to keep investors fully informed as to the status and progress of the investment, and taxes will be filed and K-1’s delivered to Investors on or before March 31st of the following year.
* Lender Requirements - Financial Partners will commit to continue to provide financial statements and tax returns to keep the lenders informed as to their ongoing financial condition, and to provide the lenders the ability to keep their credit files current.
Below is a visual representation of the investment structure:
/images/opportunity-funds-02.jpgRather than creating one entity to carry multiple investments, a new LLC is established for each investment, with WA Investments, LLC as the consistent general manager of the entities. Investors are encouraged to spread their investment across multiple properties and multiple markets to ensure a diversification of this Opportunity Funds investment. This also provides asset protection in the unfortunate event that any one asset has a legal issue arise, which is contained at that asset level and not allowed to “infect” the other assets or entities, or experiencing a catastrophic event in any one geographic market.
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