Targeted Hold Period
2-year lockup period with redemption abilities afterward
Investor Capital Managed
(as of 10//2020)
Targeted Hold Period
2-year lockup period with redemption abilities afterward
(as of 1/31/2020)
Debt and Equity Investments
Evergreen – No end date
After 2 years
1.5% on total AUM
Capital Raise Fee:
1.25% on capital raised
1, 2, or 3 years, rates vary
GP-Carried Interest (above Pref):
(as of 11/1/19)
*Disclaimer: This offering is speculative and involves substantial risks. Consider the risks outlined in the formal offering documents, including the Private Placement Memorandum before investing. Risks include, but are not limited to illiquidity, lack of diversification, complete loss of capital, default risk, and capital call risk. Investments may not achieve their objective.
Middle market real estate sponsors – especially those with robust origination capacity – have great demand for reliable capital. Fairway America created Fund VI both to facilitate capital flow to its middle market sponsor network and – to the benefit of our investors – capitalize on this highly fragmented but opportunity-laden space.
The investment mandate allows the Fund to invest in a wide variety of middle market real estate asset types such as direct investment in real property, a real estate secured loan or an investment in another real estate fund. We believe Fund VI’s opportunistic investment strategy will allow the Fund to perform well through various market cycles.
In keeping with our “value investing” mindset, the Fund’s goal is to only invest in middle market opportunities that we believe provide the possibility of attractive risk-adjusted returns while maintaining a strong margin of safety.
Keep in mind there are risks to investing in any of the offerings presented by Fairway America, as outlined in the specific offering materials. These risks include illiquidity and loss of invested capital. Please review those materials in detail before making any investment.
Why Consider Investing in Fairway America Fund VI?
We believe the combination of the list of characteristics to the right makes Fund VI a compelling investment opportunity for the astute investor who wants exposure to this alternative investment class but who does not have the time, expertise, or inclination to actively manage the risks associated with middle market real estate investments.
Fund VI Characteristics
- Diversification across several categories, including:
- Geographic – the funds have investments in 16 states
- Assets – there are 28 assets in the funds consisting of multifamily, self-storage, retail, office, industrial, and hospitality
- Investments – the funds invest into ownership (equity) of assets, real estate secured loans (debt), and sometimes into other real estate funds
- Income types – the funds produce both ordinary income and capital gains that flow to investors
- Scheduled quarterly distributions to investors
- Redemption features allow investors to request redemption after a lock-up period
- Member and noteholder options allow investors to elect different risk and return profiles
- Takes in new money on an ongoing basis so you do not have to wait for it to work
- Offers income that is distributed and appreciation that is reflected in a quarterly share price
- Broad discretionary mandate should allow for opportunistic maneuverability during all market conditions
Fund VI Investment Objectives
The Fund’s objectives with respect to acquiring Fund Assets are:
- To effectively deploy the proceeds of this Offering in well qualified Fund Assets;
- Preserve and protect each Member and Note Holder’s capital;
- Provide the Note Holders with interest rate options that will vary from time to time, depending on investment size and duration of Note maturity (see the current Note Schedule);
- Provide the Members with a Preferred Return of 8% and additional distributions
- Ultimately to provide Members and Note Holders with a return of their capital contributions.
No assurance can be given that these objectives will be attained or that the Fund’s capital will not decrease.
Strategy to Achieve Fund Investment Objectives
The Investment Strategy of the Fund will be to create a highly diversified portfolio of small balance real estate based assets. The Fund will invest in a multitude of real estate based assets of varying types in order to 1) preserve and protect Investor Capital, 2) provide a reliable income stream to Investors (both Note Holders and Members), and 3) diversify the overall risk to the Fund and its Investors.
The Manager and its principals have extensive experience in middle market real estate on both the asset and investment side of real estate asset-based fund operations. Its experience, infrastructure, advisory and consulting practice, personnel, asset valuation capabilities, and track record in this real estate niche are the genesis and driver of the Fund’s Investment Strategy.
Overview of Fund Assets
All Fund Assets shall be real estate based. As market opportunities are continually morphing and changing, the Fund’s Operating Agreement provides the Manager with significant flexibility and latitude to pursue a variety of types of real estate based opportunities for investments. Investors making an investment in the Fund should be acutely aware that the Manager will have broad investment authority within the scope of the Investment Strategy. Without limiting this authority, the following discussion generally describes the type of investments the Manager intends to pursue as Fund Assets.
The Fund, either directly or through subsidiary entities called special purpose vehicles will invest in a variety of real estate based Asset types, including but not limited to the following:
- Individual whole loans (either through origination or acquisition) secured by one or more deeds of trust on a variety of real property types
- Participation interests in real estate secured loans
- Membership units (equity) in or notes (debt) to a mortgage pool fund
- Membership units (equity) or notes (debt) to an LLC or fund that invests in real estate based Assets
- Direct fee simple ownership of real property
- An equity interest in an LLC (or other legal entity) which owns a single property in fee simple
- An equity interest in an LLC (or other legal entity) which owns an investment interest in another real estate based investment (e.g., an LLC, a JV, a fund, a note, etc.)
- Preferred equity in or mezzanine debt to an LLC (or other legal entity) that owns real estate
The Fund’s goal will be to diversify its holdings amongst various types of real estate based Assets, including but not limited to those noted above. The percentage of the Fund’s investments in each type of Asset will vary from time to time, but in order to maintain its status as a fund that is exempt from registration under the Investment Company Act by virtue of being “primarily engaged” in real estate investing, the Fund expects at least 55% of its Assets will be mortgages and other liens on, and interests in, real estate, and that a majority of all other Fund Assets will be “real-estate related,” Assets that phrase is used in the Investment Company Act and rules issued thereunder.
Asset Origination and Acquisition Strategy
The Fund intends to source and acquire Assets through localized originators and managers (“Sponsors”) in target markets around the United States. A key part of the Fund’s strategy will be for the Fund’s Manager, Fairway America Management Group II (“FAMG II”), to locate, vet, and approve high quality Sponsors with demonstrable character, integrity, track record, experience, and managerial capabilities in their particular geographic area and asset type niche. By finding, vetting, and approving high quality localized Sponsors, and diversifying the Fund’s holdings over a widespread geographic territory and number of Sponsors, FAMG II believes it can produce returns for the Fund.
Fairway, the main principal of the Manager, and/or its Affiliates provides real estate asset and fund advisory and consulting services to such Sponsors nationwide. These services include structure and creation of proprietary 506 Regulation D real estate asset-based funds, PPM reviews, strategic planning, administration of mortgage pool and other real estate asset-based funds, capital raising for middle market real estate entrepreneurs, a property technology solution that enables Sponsors to manage their investor relations and similar aspects of their businesses, and other related activities. Fairway’s business development and marketing efforts are focused on this group of Sponsors and are tightly integrated with the Fund’s asset acquisition strategy. As a result, Fairway is regularly engaged in conversations with this target audience and expects these efforts to provide investment opportunities for the Fund. Due to Fairway’s extensive background and experience in this space, its principals feel confident in their ability to discern solid, proven and reliable performers. These consulting and advisory practices represent a significant opportunity to work with solid Sponsors and vet the types of investments the Fund intends to make. This is a critical part of the Fund’s strategy and what makes it unique and desirable.
To a lesser degree, the Manager may also acquire or originate Fund Assets directly, without the use of Sponsors. Over the past 20 years, and 5 prior funds, Fairway has built up a favorable reputation among a sizeable referral base of mortgage brokers, bankers, real estate agents, and other professionals that refer transactions directly, as well as small business owners and investors looking for financing on properties they own. The Fund may deploy both origination strategies simultaneously and may pursue more of one and less of the other at any given point in time based on market circumstances in the sole discretion of the Manager.
The Fund will typically originate and/or acquire Assets with the following general parameters and considerations guiding the Manager’s decisions:
- The Fund will attempt to be geographically diverse by investing in Assets located throughout the United States.
- The Fund will attempt to diversify risk by investing in many assets of relatively small size, typically below $2,000,000 each, with no one asset being more than 10% of total Fund Assets after the Fund has reached $20,000,000 and 5% once the Fund has reached $50,000,000, and 3% after the Fund has reached $150,000,000.
- Sponsors should be reasonably experienced and have a demonstrable track record of success either in their current business and/or in prior positions, roles, and businesses for the Fund to consider an investment originated by any Sponsor (other than mortgage brokers).
- Sponsors will be vetted through various means that may include background checks, investor references, credit reports, financial statements, documentation of prior performance in their specific investment types, contracts, public records searches, and other types of due diligence used to determine character, integrity, competency, and suitability for an investment by the Fund. The degree and scope of due diligence performed on any given Sponsor shall be in the sole discretion of the Manager.
- The Fund will focus on whole and participation loan investments which are expected to constitute 50% or more of Fund Assets during the life of the Fund.
- The Fund will attempt to originate or acquire assets with expected maturity dates (or holding periods prior to anticipated exit strategy) of roughly 1-5 years. The Fund will strive to create expected exits on its assets roughly equally throughout these time frames (e.g., 20% within 1 year, 20% within 2 years, etc.) so as to create anticipated runoff of the portfolio of approximately 20% per year. The actual percentages may vary significantly and shall be determined in the sole discretion of the Manager. Although the Fund will generally intend to reinvest recovery of capital from the disposition or payoff of assets, a steady runoff of a portion of the portfolio is expected to help provide the Fund reasonable liquidity for Note Holders and Members.
- The Fund will focus on assets that are expected to produce reliable and predictable cash flow rather than highly speculative upside. The Fund may place some portion of its investments in “value-add” assets with some back-end upside potential, but typically these investments will still contain an ongoing cash flow component. The determination of cash flow vs. “value-add” investments at any given point in time shall be in the sole discretion of the Manager.
- The overarching goal of the Fund is to create a diversified portfolio of real estate based assets that produces significant income, provides strong downside capital protection, and provides reasonable liquidity considering its nature as a real estate asset-based Fund.
The Fund does not intend to invest (either debt or equity investments) in Assets solely with the following real estate characteristics:
- Raw Land
- Development projects
- Ground up construction
- Very small or rural locations
- Deals with no income producing (or capability of income generation) component
In order for the Fund to consider opportunities containing any of the above characteristics, there must be compelling mitigating circumstances (such as additional collateral, extraordinary location, and/or especially low exposure ratios) in the judgment of the Manager.
See the Fund’s Private Placement Memorandum (link below) for additional information and a glossary of defined terms used above.
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This offering is speculative and involves substantial risks. In addition to the general risks of investing in a private real estate offering, which include illiquidity, lack of diversification, complete loss of capital, default risk, and the risk that the Fund’s investments may not achieve their objectives, some of the more significant risks associated with this investment include the following:
The Fund’s Underwriting Standards and Procedures are More Lenient than Conventional Lenders
The Fund will invest in Mortgage Loans with Borrowers who will not be required to meet the credit standards of conventional mortgage lenders, which is riskier than investing in loans made to Borrowers who are required to meet those higher credit standards. Because the Manager approves Mortgage Loans more quickly than some other lenders or providers of capital, there may be a risk that the due diligence the Manager performs as part of its underwriting procedures would not reveal the need for additional precautions. If so, the interest rate the Fund charges and the Collateral the Fund requires may not protect the Fund adequately or generate adequate returns for the risk undertaken. A Borrower’s ability to pay a Mortgage Loan balance in a large lump sum may depend on its ability to obtain suitable refinancing or otherwise raise a substantial cash amount.
The Fund May Have Difficulty Protecting its Rights as a Secured Lender
The Fund believes that its Fund Asset documents will enable it to enforce commercial arrangements with Borrowers and other counterparties. However, the rights of Borrowers, counterparties, and other secured lenders may limit the Fund’s practical realization of those benefits. Care is exercised upon creation of the legal documents at the time of origination, or through thorough review of such documents in the event of acquisition, to ensure that as many bases as possible have been covered in the documents. However, in the event of default, it can be very difficult to predict with any certainty how courts will respond.
Risks of Investing in Subordinated Loans
Some of the Fund’s investments may consist of subordinated loans, including mezzanine loans and “B-Notes” and other subordinated real estate debt-like instruments. Such investments will be subordinated to the senior obligations of the property or issuer, either contractually, inherently due to the nature of equity securities, or both. In the event of default on the senior debt, the holders of subordinated loans may be at the risk of realizing a loss of up to all of their investment before the senior debt will suffer any loss. Consequently, greater credit risks are usually attached to these subordinated investments than to a borrower’s first mortgage or other senior obligations. In addition, these securities may not be protected by financial or other covenants and may have limited liquidity. Adverse changes in the Borrower’s financial condition and/or in general economic conditions may impair the ability of the Borrower to make payments on the subordinated securities and cause them to default more quickly with respect to such securities than with respect to the Borrower’s senior obligations. In most cases, the Fund’s management of its investments and its remedies with respect thereto, including the ability to foreclose on any collateral securing investments, will be subject to the rights of the more senior lenders and contractual intercreditor provisions.
Risks of Investments in Other Funds
When the Fund invests in units or notes of other real estate based funds, there are additional risks to that particular investment including, but not limited to, the following: The Manager will not be choosing the specific assets into which such a fund might invest but will instead be relying on the manager of such a fund to make the investment decisions. These investment decisions may or may not produce the expected results; The units or notes in such a fund are not likely to be easily liquidated in a timely manner; The method of valuation of the units may not reflect their true underlying value; Such a fund may be the subject of litigation which may cause the Fund to lose its investment or significantly impair and/or delay recovery; There may a myriad of other risks to such a fund similar to those articulated in the PPM that may cause the Fund to lose its investment in such a fund.
Risk that the Price Charged for a Unit does not Reflect its Value
The price at which the Fund offers Units pursuant to the Offering, and the price at which a Member will purchase additional Units under the Reinvestment Option, is determined by the Manager in its sole discretion, will fluctuate based on the collective Stated Value of all of the individual Fund Assets, and usually will not be known when an Investor commits to making an investment in Units and transfers money to the Fund. Because the Stated Value of any given Fund Asset may not accurately reflect its actual value, the Unit Price may not accurately reflect the actual value each Unit at any given point. Hence, the price of a Unit could be adjusted by a premium or discount at any given point in time if the Assets were sold in a secondary market. Members should realize that the only measure of fair market value for a Unit is the price that would be determined under a ready market for the Units. Because no ready market for the Units exists or is anticipated, a perfectly accurate determination of the fair market value of the Units cannot be established. The Manager will determine Unit Prices in good faith in its sole discretion.
This description of risks is not intended to be comprehensive. Please consider the more complete description of risks outlined in the Fund’s formal offering documents, including the Private Placement Memorandum, before investing.