Fund Overview
- Fund Size: Targeting $100 million to invest in underappreciated residential properties, real estate loans, and high-yield opportunities.
- Minimum Investment: $50,000 (one Unit), with the possibility of accepting smaller investments at the General Partner’s discretion.
- Investment Strategy: Focused on acquiring and renovating properties in and around Detroit, MI area, offering single family residentials (SFR) and multi-family investments, and alternative high-yield strategies.
Target Returns
- Annualized Returns: Aiming for 10% to 16% per annum through diversified investments across 5 years.
- Distribution Options:
- Class A: 8% annual preferred return (compounded); priority on liquidation.
- Class B: 4% quarterly distributed, with an additional 4% compounding.
Investment Strategy Execution
- Property Turnaround: Acquiring undervalued properties, renovating, and managing for cash flow growth.
- Alternative Investments: High-interest loans and contract assignments.
- Exit Strategy: Potential sales to institutional buyers or refinancing to unlock value.
Risk Factors
- Market Risks: Subject to real estate cycles.
- Illiquidity: Long-term horizon with limited withdrawal options.
- Leverage Risks: Use of debt can magnify gains or losses.
Fees and Management
- Fees: 1.5% asset management fee, 1.5% acquisition fee, 3% disposition fee.
- Management Team: Led by Mousa Ahmad, Todd Silver, and Michiko Nakayama, with extensive experience in real estate and investment.
Investor Support
- Reporting: Quarterly reports via 24/7 cloud application with annual financial statements.
- Fund Structure: Evergreen, accepting investments quarterly to align with reporting.
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Investor Q&A for Mutual Trust Management Advisors LP
1. What is the minimum investment required?
The minimum initial investment is $50,000, representing one Unit. However, the General Partner may accept smaller investments at their discretion, and fractional shares may be issued for odd amounts.
2. Can I invest in the fund at any time?
Yes, the fund operates as an evergreen fund, allowing new investments on a rolling basis. Typically, investments are accepted at the start of each quarter to align with the fund’s reporting schedule. Note that late-stage investors may not experience as much compounding as early entrants, and the performance of individual years can vary.
3. What is the size of the fund?
The fund targets a total capital raise of 100 million dollars, which will be used to acquire underappreciated residential properties, provide loans for real estate transactions, and pursue high-yield investment opportunities. The fund size allows for a diversified portfolio, aiming to balance risk and maximize returns across various asset classes. At minimum, the General Partner will try to amass a portfolio of at least 500 units.
4. What types of investments will the partnership make?
The partnership focuses on underappreciated residential real estate in the Detroit, Michigan area, including multi-family properties and loans for acquisition, refinancing, and renovation. It also pursues intangible assets, such as contract assignment agreements, leveraging strategic relationships with the region’s largest property management company.
5. What is the target return on investment?
The partnership aims for an annualized return of 10% to 16%.
6. How exactly can the target return be achieved?
The target annualized return is pursued through a diversified strategy:
- Property Acquisition and Turnaround: The General Partner acquires underappreciated properties in strategic locations, enhances them through renovations, and manages them for high cash-on-cash returns, increasing both equity and cash flow.
- Leveraging Financing: The partnership may utilize lower-leverage conventional bank loans to optimize financing costs, boosting flexibility and enabling reinvestment.
- Alternative High-Yield Investments: The partnership may engage in high-interest collateralized loans, contract assignments, and joint ventures to diversify income sources.
- Exit Strategy: Once stabilized, the fund may explore options like selling to institutional buyers or refinancing to unlock value.
7. Will I be able to save on taxes if I invest with the fund?
Like most other private equity funds, investors must typically use after-tax dollars, unless investing through a self-directed IRA or a self-directed solo 401(k). The fund employs optimal tax strategies, such as depreciation and cost segregation, to enhance tax efficiency during the life of the fund. However, dividends and distributions will still be taxed according to each investor’s individual tax status.
8. How does the partnership execute its overall investment strategy to grow the portfolio?
The partnership uses a proprietary algorithm to underwrite each property across multiple scenarios, optimizing cash flow management, evaluating financing options, and identifying the best reinvestment opportunities for long-term growth.
9. Who manages the partnership, and how is property management handled?
Mutual Trust Management Advisors GP LLC oversees all operations. The General Partner consists of Mousa Ahmad, Todd Silver, and Michiko Nakayama, each bringing unique skills to drive the fund’s objectives. The partnership also benefits from a strategic relationship with the area’s largest property management company, which manages tenant matters and maintenance.
10. How can investors be confident that the managers will act in their best interests?
The General Partner is legally bound to act in the partnership’s best interests, avoiding any misconduct. Compensation is linked to performance, aligning their incentives with investor success.
11. What are the differences between Class A and Class B Limited Partnership Interests?
- Class A: For long-term investors. Receives 8% annual preferred return compounded cumulatively. Priority during liquidation.
- Class B: For those preferring regular returns. Receives 4% distributed quarterly, with 4% compounding to be paid at the end of the fifth year.
12. How will investor returns be distributed?
Returns are distributed quarterly, with Class A and B receiving an 8% annual preferred return. Class B’s remaining 4% is accrued and distributed at the end of the period.
13. What risks are associated with investing in this partnership?
The partnership involves risks such as:
- Management Control: Solely held by the General Partner.
- Leverage Risks: Debt can amplify returns and losses.
- Market Conditions: Real estate value is subject to cycles and trends.
- Illiquidity: Hard to liquidate, requiring patience for capital access.
14. What fees are associated with this investment?
- Asset Management Fee: 1.5% of the After Repair Value.
- Acquisition Fee: 1.5% of the purchase price.
- Disposition Fee: 3% of the gross sales price.
- Other Fees: May apply during underwriting.
14. What reporting will investors receive?
Quarterly reports on financial performance, property updates, and investment goals are provided via Appfolio Alpha, with annual financial statements ensuring transparency.
16. Can investors transfer or sell their ownership interests in the partnership?
Transfers are generally restricted and require the General Partner’s approval. Exceptions may be made for family members or related trusts.
17. What happens if I need to withdraw money due to an unexpected event?
The partnership has a five-year horizon. While early withdrawals are unusual, exceptions will be considered under extraordinary circumstances, and there will be opportunities to become note holders with a shorter investment duration, at the General Partner’s discretion.
18. What happens if the partnership is dissolved, either at the end of the fifth year or earlier?
In the event of dissolution, assets will be liquidated and proceeds distributed based on each partner’s Capital Account after settling liabilities.
19. How are distributions prioritized among Class A, Class B, and note holders?
The partnership follows the below waterfall structure for payments:
- Note holders: Are paid in full, including both principal and interest, before any distributions to Class A or B investors, as they have the highest priority for payments.
- Class A Limited Partners: Receive their 8% preferred return, compounded annually, and have priority over Class B investors for principal repayment during liquidation or capital events.
- Class B Limited Partners: Receive their 8% preferred return, with 4% distributed quarterly and the remaining 4% paid at the end of the investment period. Principal repayment occurs after all obligations to Class A investors are met.
- Any remaining profits: After satisfying the obligations to note holders, Class A, and Class B investors, any additional profits are distributed according to the terms of the partnership agreement.