Press Release from Pride of Austin Capital Partners
Press Release: Regarding Pride of Austin High Yield Fund 1. If this information interests you then perhaps we can discuss the benefits of this investment vehicle for you and or your clients and referrals.
The fund is a mortgage pool security filed as a Regulation D filing with the Securities and Exchange Commission with an authorized issue of $100,000,000. The fund is managed by Pride of Austin Capital Partners, LLC (more on this relationship later). The minimum investment in the fund is $25,000 and an investor agrees to place the investment for two years before withdrawal. However, there are mechanisms in place if the investor needs to cash out the investment prior to two years.
Pride of Austin High Yield Fund I (POAF) is owned 100% by the investors in the fund. The percentage of ownership of the fund is based upon the percentage of the investor’s investment into the fund. As such, the risk to an investor is spread over all of the assets owned by the fund as opposed to one asset. POAF is more dissimilar than similar to a Real Estate Investment Trust (REIT) and a Limited Liability Partnership (LLP) but it is a hybrid of both and has so many more benefits and features than either of the other two investment vehicles.
A REIT purchases real estate and manages the real estate. The investors in the REIT participate in the profits of the buying and selling of real estate with the managing entity. REIT managers generally make between 20% and 50% of the profits made on the movement of real estate. REIT managers often times do not have any of their own capital in their REIT. This diminishes the return to the investors because the management fees are so high. A REIT manager can purchase property for long term holding and can buy property at whatever value they feel is appropriate. Sometimes a REIT manager purchases property for 100% of the value because they feel that by holding it over many years it will appreciate in value. Sometimes that does not happen. Point in case, of late, many of the REIT’s are loosing money because their portfolio of properties has lost value.
Like a REIT, investors in POAF spread their ownership over several properties. Unlike a REIT the management company is limited to earning a fee equal to ONE PERCENT annually of the total investment in the fund. This assures that the investors in the fund are making the highest return on their investment.
The management company cannot buy a property or lend on a property for more than 65% of the value of the property. That is one of the limitations of the filing with the SEC. This benefits the investors in the fund by minimizing risk due to the higher than normal equity buffer in the property.
Unlike a REIT, POAF usually moves the asset out of the fund within a year. POAF is not designed to accumulate property and hold it in hopes that the property appreciates.
Unlike a REIT, POAF usually lends money and holds a first lien on the property as opposed to managing the property itself. Management comes into play only if POAF has to foreclose on the lien and take possession of the property to resell it. In this case the investors will make the profits on the sale of the property.
Generally a Limited Liability Partnership is established to raise capital to purchase or lend against a single property. Investors in this type of investment vehicle have a great deal of risk exposure because the asset is singular and the investment return is hinged upon that singular property. If the market is great then the asset will pay off. If the market tanks then the asset may or may not perform as well. An LLP is managed by a General Partner (GP). Some partnerships are structured where the GP has its own capital into the partnership and some are structured where the GP is only using capital from the LLP’s. Generally a GP makes a hefty percentage of the profits in these types of partnerships.
POAF lends money on a low loan-to-value ration with terms of one year or less and interest rates of 12% or more plus lender points. Because of the high interest rates, the additional lender points and the short terms of the loans the fund makes a high yield for the investors in the fund. Pride of Austin Capital Partners, LLC (POACP) manages the assets of the fund and is an investor in the fund. The management agreement between POAF and POACP allows for the fund to pay a management fee of ONE PERCENT annually of the balance in the fund and it pays ONE PERCENT of the loan balances to manage the loans for POAF.
POAF only takes in investments into the fund when it has loans ready to be made. POACP manages the flow of money in and out of the fund to make sure that the capital is working for the investors at all times and is not sitting in a bank. This detailed management of the assets of the fund keeps the yield up high for the investors in the fund.
There are five new loans that POACP is considering making for POAF between now and April 30. POAF has a capital opening for $295,000 from investors (minimum investment per investor is $25,000 but there is not a maximum investment). These loans will be added to the mortgage pool and increase the yield to the investors in POAF. Here are the details of the five new loans slatted for funding. In reviewing these one can easily see how we keep the yield high for the investors.
An $80,000 loan against a 2.33 acre tract of land zoned SF6 and valued at $250,000 located in North Austin. The terms are for 1 year, 14% plus 3 points (a 17% return to POAF).
A $60,000 loan against a home located in Lakeway valued at $300,000. The terms are 1 year, 14% plus 3 points.
A $30,000 loan against a home located in the DFW area with a renovated value of $75,000. This is a rehab loan and the borrower is going to sell the property. The term is 6 months, 15% plus 3 points.
An $110,000 loan against a home located in Austin with a renovated value of $250,000. The borrower is a rehab investor. The terms are 6 months, 14% plus 3 points.
A $15,000 purchase of a tax certificate on a property valued at $600,000 in Austin. A tax certificate is primary over a first lien and pays a return of 25% by State statue in one year or less. A holder of a tax certificate can foreclose on a property without the permission of a first lien holder.
The gross yield to POAF on these 5 loans alone is $41,550. Based upon a $295,000 investment that is a 14.1% return to the fund. HOWEVER, 2 of the loans totaling $140,000 are for 6 months. POACP will easily be able to loan this money again for another 6 months adding $23,800 to the yield for a total annual yield of $65,350 or a 22.2% return to the fund. That is a huge ROI with a limited risk factor.
These types of loan scenarios are why the fund is generating high returns to the investors of the funds. With commercial banks virtually shut down the demand for these types of loans will only increase. We always have a pool of loan request to select the better loans that will return high yields with a limited risk to the fund.
In addition to earning high returns on your money POACP pays a nice referral fee to our investors for referring other investors. Please keep that in mind as it can be a nice passive revenue stream for you.
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