Frequently Asked Questions

None

Single-Asset Syndications

Is this offering made through North Capital Private Securities?

No.

What is middle market real estate?

Middle market real estate is a term used to describe commercial real estate properties that are located in mid-tier cities and owned by private individuals or private companies. Middle market private real estate investing is a process of investing in real estate that can provide investors with the potential for risk-adjusted returns through active investment manager involvement. Middle market private real estate investing can be more opportunistic and entrepreneurial than investing in REITS, which typically pay high prices for large, stabilized properties in gateway markets. The middle market by contrast is primarily made up of sub-$100M properties that are often found in a variety of stages (high vacancy, deferred maintenance, new construction, leasing up, stabilized, etc).

How Does the Investor Get Paid?

If you invest in a syndication, payments are typically on a quarterly basis once the project reaches a point in the business plan where it is generating income and there is sufficient cash to distribute after fees and expenses. Those payments fluctuate based on the Net Income generated by the investment and any sales of assets, contingent on available cash. You should review all offering documents thoroughly and consult with your investment, tax, and legal professionals before deciding what type of investment is best in your circumstances.

How Long Can I Expect My Investment to Be Tied Up?

Most of our syndication investments are intended to be 3-5 year holds. However, some investments can take longer. The timelines in offering documents are not guaranteed and may be impacted by factors such as market conditions and ability to execute the business plan as underwritten.

Can I redeem out of my investment?

No, you are a partner in the ownership entity of the project with no opportunity to redeem or transfer your investment. The typical targeted hold for our syndications 3-5 years or longer as determined by the manager. The targeted hold period in the offering documents is not guaranteed and may be modified based on what the manager believes will be most accretive to investors.

What kind of tax documents will I receive?

K-1

How Do You Source Your Deals?

Our unique co-manager investment platform allows us to partner and collaborate with emerging sponsors who are high in human capital and experience but haven’t proven their investment platform or strategy at scale yet. We attempt to find sponsor partners we believe will be scrappy, passionate, and skilled at finding new opportunities or novel ways of adding value because of their local market expertise.

What happens if a sponsor doesn’t execute?

In the event a sponsor is unable to perform, Fairway is there to assist in execution and pressure the sponsor to take action to get the business plan back on track. Fairway intends to act as a counterparty risk mitigant for investors who want to access lower middle-market private real estate but are otherwise hesitant to partner with an emerging sponsor. Our team has over three decades of professional investment experience and is highly skilled in underwriting, deal structuring, asset management, and strategic execution and is able to provide guidance and encouragement if a sponsor is not executing a project as planned.

What are the risks?

Middle market real estate is a less liquid investment than most publicly traded securities. There is usually no ability to sell or redeem your investment position in a syndication in order to liquidate quickly. Investors may be required to hold their investments for extended periods of time. Investments are not insured or guaranteed. All investments in real estate involve risks including but not limited to default risk, illiquidity, and complete loss of capital. Some risks are outside of the control of the investment manager. We highly recommend that investors read the Operating Agreement and offering memorandum for any syndication thoroughly and consult with your investment, legal, and tax professionals prior to making any investment decisions.

Is there a Preferred Return associated with an Equity Investment?

Our syndications do generally offer a preferred return, with the rate being dependent on the risk profile of the investment (generally between 8-10%). This is not a guaranteed return, but simply an initial pro rata (i.e. strictly proportional) tranche of potential investment profits paid to investors before the manager shares in profits. Payment of the preferred return is contingent on the income of the property and the available cash after all expenses and fees.

What Are Your Historical Returns?

Syndications: Please see our current direct real estate track record and historical returns here. Past performance does not guarantee future results.

How do I make an investment?

We partner with Verivest, our affiliated investment administration firm, to make your experience as seamless as possible. Once you are ready to commit to an investment with Fairway America, you create an account on their investor platform and they will walk you through the subscription process.

What are some potential tax advantages of investing in private real estate?

The following are some possible tax benefits for investors who invest in real estate. Each investor’s situation is different, so consult with your tax professionals to determine how to best access the potential tax advantages of real estate investing.

Long-Term Capital Gains: Successful real estate projects may generate a capital gain at the sale of the property. Long-term capital gains are treated at a lower tax rate than ordinary income for some investors.

Interest Deductions: For equity investors specifically, another potential tax benefit is that the IRS allows the interest paid on the principal mortgage to be expensed.

Depreciation: Real estate projects may include an opportunity for some investors to claim depreciation. Depreciation is treated as an expense, often generating significant tax losses, and thus has the potential to offset operational income that is being generated for some investors. Taxes are a highly complex and specialized area, and each individual investor will have a unique set of circumstances that should be taken into account. We strongly recommend finding a CPA that has experience in real estate taxes and K-1 filings.

What’s your competitive advantage in the market?

We are first and foremost a relationship business. Our carefully selected sponsor partners have been approved through our thorough, in-depth sponsor qualification process. There is always a risk of unforeseen circumstances, but we believe our sponsor assessments do a thorough job of evaluating sponsor potential to be productive partners. When new sponsor partner presents a new investment opportunity to us, our investor base can invest in the deal knowing Fairway has three decades of experience as a professional investment manager underwriting and asset managing the deal. Our team is comprised of qualified real estate professionals with a variety of skills and experience through multiple economic cycles who provide strategic oversight throughout the life cycle of the opportunity. The programmatic partnerships we create with our sponsors lead to investment opportunities that we believe have a likelihood of achieving the investment business plans across a wide range of strategies, asset classes, geographies, and risk profiles. Because of their presence and connections within a subject market, our investments team receives a huge amount of real-time market information, which gives us the ability to source what we believe are suitable risk-adjusted deals across all markets and product types at that point in the business cycle for our investor base.

What does your typical distribution waterfall structure look like?

https://fairwayamerica.com/resources/what-is-a-private-equity-waterfall/

A waterfall is the order in which cash is distributed to investors and the manager. There are many ways to structure waterfalls, but typically they include a preferred return, the return of investor capital, and a split of cash between the investor and the manager which can be called a performance fee, promote, or profit split. Our preferred returns are typically set between 8-10%, and the profit split varies based on the deal and the performance of that deal after investors receive a return of 100% of their original investment.

Multi-Asset Funds

Is this offering made through North Capital Private Securities?

Yes, this type of offering is solicited through North Capital Private Securities, Member FINRA/SIPC.

What is middle market real estate?

How Does the Investor Get Paid?

There are two types of investments that investors may have access to when investing in real estate funds: debt and equity investments. If you hold an equity position, payments are typically on a quarterly basis, assuming there is sufficient cash to distribute after fees and expenses. Those payments fluctuate based on the Net Income generated by the fund and any sales of assets within the fund, contingent on available cash. If you are a note holder, you may receive monthly payments at a set interest rate, either accrued or paid current depending on the investment. You should review all offering documents thoroughly and consult with your investment, tax, and legal professionals before deciding what type of investment is best in your circumstances.

What Are the Fees Charged/Associated with an Investment in Fairway’s Funds?

The Funds typically carry a 1.5%-2% management fee. There are also some other fund expenses outlined in each fund’s Private Placement Memorandum which are paid by the fund (i.e. capital raise fees to the broker-dealer, onboarding fees, tax preparation expenses, and other administration costs). Consult the offering documents and talk to your investment professional to understand all fees that may apply prior to making a decision to invest in a fund.

What Are Your Historical Returns?

Please see the historical track record for our current funds here. Past performance does not guarantee future results.

What leverage does the fund currently have?

In Q3 2022, the Debt-to-Capitalization Ratio was 27.92% for Fund VIIQP. Generally, we aim to maintain a leverage ratio of less than 30% as well as a staggered note maturity schedule.

How many assets are in Fairway’s Open-End Funds?

Fund VII and VIIQP are our diversified funds which invest across multiple asset types. These include direct real estate, loans, and other funds. Direct real estate asset classes include: multi-family, self-storage, retail, industrial, and some office. There are approximately 80 fund level investments which fluctuate on a quarterly basis as the fund acquires and disposes of assets.

What are some potential tax advantages of investing in private real estate?

Interest Deductions: For equity investors specifically, another potential tax benefit is that the IRS allows the interest paid on the principal mortgage to be expensed.

Taxes are a highly complex and specialized area, and each individual investor will have a unique set of circumstances that should be taken into account. We strongly recommend finding a CPA that has experience in real estate taxes and K-1 filings.

What happens if a sponsor doesn’t execute?

In the event a sponsor is unable to perform, Fairway is there to assist in execution and pressure the sponsor to take action to get the business plan back on track. Fairway intends to act as a counterparty risk mitigant for investors who want to access lower middle-market private real estate but are otherwise hesitant to partner with an emerging sponsor. Our team has over three decades of professional investment experience and are highly skilled in underwriting, deal structuring, asset management, and strategic execution and is able to provide guidance and encouragement if a sponsor is not executing a project as planned.

What does your typical distribution waterfall structure look like?

https://fairwayamerica.com/resources/what-is-a-private-equity-waterfall/

A waterfall is the order in which cash is distributed to investors and the manager. There are many ways to structure waterfalls, which typically include a preferred return, the return of investor capital, and a split of cash between the investor and the manager which can be called a performance fee, promote, or profit split. Fairway Funds do not all have a preferred return, but rather distribute 100% of net distributable cash flow after management fees and other Fund expenses.

What are the risks?

Middle market real estate is a less liquid investment than most publicly traded securities. Fund investments are less transparent to investors because the fund manager decides what investments to make, but funds also give investors exposure to a wider range of assets than single asset syndications. There is a limited ability to sell or redeem your investment position in order to liquidate quickly. Investors will be required to hold their investments for extended periods of time. Investments are not insured or guaranteed. All investments in real estate involve risks including but not limited to default risk, illiquidity, and complete loss of capital. Some risks are outside of the control of the investment manager. We highly recommend that investors read the Operating Agreement and Private Placement Memorandum thoroughly and consult with your investment, legal, and tax professionals prior to making any investment decisions.

Is there a Preferred Return associated with an Equity Investment?

The open ended Fairway Funds don’t offer a Preferred Return. Instead, investors receive 100% of net distributable cash flow after management fees and other fund expenses. Said another way, this is effectively a 100% preferred return.

Closed ended Fairway Funds may offer a preferred return depending on the Fund. Read the Private Placement Memorandum before investing in any fund.

How Long Can I Expect My Investment to Be Tied Up?

Closed-End Funds: Closed-End Funds typically have a lifespan of 5-7 years.
Open-End “Evergreen” Funds: Note holders can expect a 1-3 year commitment for their funds. This is also known as a “lockup period.” In Fairway’s open-end funds, after a 2-year lockup, investors may redeem 50% of their commitment. The remaining 50% can be redeemed after the 3rd year. Redemptions are subject to available cash and made in the manager’s discretion. Redemption requests may take time to fulfill.

Can I redeem out of my investment?

Closed-End Fund: No, you are a partner in the ownership entity of the portfolio. Typical lifespan of 5-7 years.

Open-End “Evergreen” Fund: Yes, investors can request up to 50% of their investment back after 2 years and the remainder of their investment back after 3 years subject to the availability of cash to fulfill redemption requests and the manager’s discretion.

How do I make an investment?

What kind of tax documents will I receive?

K-1 for equity holders, 1099 for note investors. Please note that our funds have historically been unable to provide K-1 documents prior to the April 15 tax deadlines. Many investors in our funds file their returns on an extended basis.

How Do You Source Your Deals?

Our unique co-manager investment platform allows us to partner and collaborate with emerging sponsors who are high in human capital and experience but haven’t proven their investment platform or strategy at scale yet. These co-managers are our most common source of deals for the funds. We attempt to find sponsor partners we believe will be scrappy, passionate, and skilled at finding new opportunities or novel ways of adding value because of their local market expertise.

What’s your competitive advantage in the market?

We are first and foremost a relationship business. Our carefully selected sponsor partners have been approved through our thorough, in-depth sponsor qualification process. There is always a risk of unforeseen circumstances, but we believe our sponsor assessments do a thorough job of evaluating sponsor potential to be productive partners. When a sponsor partner presents a new investment opportunity to us, our investor base can invest in the deal knowing Fairway has three decades of experience as a professional investment manager underwriting and asset managing the deal. Our team is comprised of qualified real estate professionals with a variety of skills and experience through multiple economic cycles who provide strategic oversight throughout the life cycle of the opportunity. The programmatic partnerships we create with our sponsors lead to investment opportunities that we believe have a likelihood of achieving the investment business plans across a wider range of strategies, asset classes, geographies, and risk profiles. Because of their presence and connections within a subject market, our investments team receives a huge amount of real-time market information, which gives us the ability to source what we believe are suitable risk-adjusted deals across all markets and product types at that point in the business cycle for our investor base.

This page is not a solicitation to sell securities. All securities are offered through North Capital Private Securities, member FINRA/SIPC. An investment in a Fund involves significant risks. It is only appropriate for qualified, sophisticated investors that are able to bear the economic risk of a complete loss of their investment in the Fund. Risks include illiquidity, lack of diversification, complete loss of capital, default risk, and the risk that the Fund may not achieve its objectives. This description of risks is not intended to be comprehensive. Please review the more extensive description of risks outlined in the Funds’ formal offering documents, including the Private Placement Memorandum, before investing.

Real Estate Investments and Securities offerings are speculative and involve substantial risks. Consider the risks outlined in the applicable investment offering documents before making any investment. 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 objectives. Investors who cannot afford to lose their entire investment should not invest in such offerings. There is no guarantee that any stated valuations or other terms appearing on this website are accurate or in agreement with the market or industry terms or valuations. All securities will be offered through North Capital Private Securities, member FINRA/SIPC