CLOUD
TORONTO – FYBN CORE+ GROWTH & INCOME FUND LLC
a New York
limited liability company
PRIVATE PLACEMENT MEMORANDUM
Offer of Class B Limited Liability Company Units
October 16, 2023
Questions and requests
for information may be
directed to:
CLOUD TORONTO – FYBN CORE+ GROWTH & INCOME
FUND LLC
970 Peachtree Industrial
Blvd, Suite 1-2, Suwanee, GA 30024
408 856 5031
Email: di.mo@cloudtoronto.us
This is not an offer to sell or a solicitation of an offer to buy the Units
described herein in any jurisdiction to any person to whom it is
unlawful to make such an offer or sale.
CLOUD
TORONTO – FYBN CORE+
GROWTH & INCOME FUND LLC
a New York
limited liability company
THIS OFFERING IS LIMITED
TO ACCREDITED INVESTORS
Minimum Subscription for Class B Units: $250,000.00
Initial Price Per Class B Unit: $1,000.00
This Private
Placement Memorandum (this “Memorandum”) describes the offering (the “Offering”)
of limited liability company interests in CLOUD TORONTO – FYBN CORE+ GROWTH & INCOME FUND LLC, a New York
limited liability company (the “Fund”). The Units (as defined below)
will be sold pursuant to and in accordance with the terms set forth in this Memorandum. The
Units will be sold exclusively to “Accredited
investors” (as such term is defined in Rule 501 of Regulation D, as
promulgated under Section 4(2) of the Securities Act of 1933 (as amended, the “Securities
Act”)).
It is intended
that the Fund will be treated as a partnership for federal income tax purposes. The Fund will be managed by its manager, Cloud
Toronto – FYBN Core+ Growth & Income
Fund GP LLC, a New York limited liability company (the “Managing Member”),
an affiliate of the Fund’s sponsor.
The purpose of
the Fund is to acquire, develop, manage, operate, lease, and sell, directly or
indirectly, commercial real estate properties consistent with the Fund’s
investment strategy of acquiring quality income- producing and value-add commercial properties, which do not require
significant development, that are either
operated by Affiliates of the Managing
Member or unrelated third parties, and, in some circumstances, leased
under short term and long-term leases to creditworthy
tenants. The
Fund may also invest in: (i) equity interests in entities that have developed
and/or acquired quality income producing commercial properties and are either
operated by Affiliates of the Managing Member or unrelated third parties, (ii)
debt securities (e.g., promissory notes, mezzanine debt instruments) secured by
security interests in commercial properties (such investments collectively the
“Real Estate Portfolio”), and (iii) in shares of publicly-traded securities
issued by real estate investment trusts (“REITs”) (up to a maximum amount of twenty-five (25%) percent of net assets the Fund) (“REIT Portfolio” and together with the Real Estate Portfolio, the “Fund Portfolio”).
The Fund
Portfolio will be held through Cloud Toronto – FYBN Core+ Growth & Income Fund REIT, LLC (the
“REIT Subsidiary”). The Fund will act as manager
of the REIT Subsidiary and the Fund will invest
substantially all its assets
into Common Units (as such term is defined in the REIT Subsidiary operating
agreement) of the REIT Subsidiary. Further information with respect to the REIT
Subsidiary is set out in the REIT PPM Supplement (the “REIT Supplement”) attached
to this Memorandum as Appendix C. Investors are encouraged to read both the Memorandum and the REIT Supplement in
their entirety.
The sponsor
of the Fund (the “Sponsor”) is Cloud Toronto –
FYBN – The Wealth
Development Company, a trade name used
to refer to a group of affiliated entities directly or indirectly controlled by
Cloud Toronto – FYBN Cos, Inc., a New York corporation. The Sponsor is a middle
market alternative asset manager who has been involved in acquiring, managing,
and disposing of commercial real estate-related assets for over thirteen years.
This
Memorandum provides important information you should know before investing in
the Units. Please read it carefully before
you invest and keep it for future
reference. You should rely only on the information contained in this Memorandum or information to which we have referred
to you. We have not authorized anyone
to provide you with additional information or
information different from that contained in this Memorandum.
Brief Overview of the Units
A general
description of the rights, preferences, and restrictions associated with the Units is set forth below. Each Investor should
carefully read this Private Placement Memorandum (this “Memorandum”) and the Limited Liability Company Agreement (the “LLC Agreement”), a copy of which has
been enclosed as Appendix A, to understand certain risks associated with
acquiring Units and the rights, restrictions, and obligations associated with
the Units.
Class B Units
The
class of limited liability company units being offered hereunder is referred to
as the “Class B Units.” The Class B
Units are being offered at a price per Class B Unit as indicated at the
beginning of this Memorandum, and thereafter at the applicable Net Asset Value
per Unit on the applicable Dealing Day (as defined below). The holders of the Class B Units are referred
to herein collectively as the “Class B Members” and each a “Class B Member.”
The Class B Units will have limited
voting rights, as described in the
LLC Agreement. Class B Members
are entitled to participate in the income
and profit of the Fund, subject to the Managing Member Performance Allocation.
Class
B Units will be subject to a Managing Member Performance Allocation (as further
described below) of twenty (20%) percent.
To assist in funding
and diversification of the Fund,
the Managing Member,
in its discretion, may create
and offer other classes of Units in the Fund which may carry different
rights and be subject to different fees and commissions.
The
Class B Members together with other members identified in the LLC Agreement are
referred to herein collectively as the “Participating Members” and each a “Participating Member.” The Class B Units together
with any other Units
identified in the LLC Agreement shall be referred to as the “Participating Units.” The Participating Members are also
referred to herein collectively as the “Investors”
and each an “Investor.”
A summary of
the Managing Broker Dealer Fees and sales commission limits for Class B Units
permitted under the LLC Agreement and as described in further detail in this
Memorandum is set out below:
Managing Broker Dealer
Fees |
Class B Units |
Managing Broker Fee:
Based on gross assets
raised attributable to the Managing Broker Dealer |
0.7% |
Sales Commissions
Based on transaction value To be paid to duly licensed Affiliated Agents of the Managing Broker- Dealer and who are also affiliated with the Managing
Member |
Up to 2% |
Marketing Reallowance
Based on transaction value To be paid to Selling Group
Members of the Managing Broker-Dealer |
Up to 1% |
Managing Member Units
The Managing
Member intends to make capital contributions equal at least one (1%) percent of
the capital contributions of all of the Participating Members. The Managing Member may make a capital
contribution to the Fund no less frequently than semi-annually, so that the Managing Member capital contribution equals at least one
(1%) percent of the capital
contributions of all of the Participating Members. The Managing Member may offset capital contributions to the
extent Cloud Toronto – FYBN Cos or its affiliates make direct investments in
underlying holdings of the Fund.
Distribution Policy
The Fund will
receive dividends from the REIT Subsidiary as further described in the REIT
Supplement. Subject to receipt of such dividends, the Managing Member intends
to declare and make periodic distributions to Members, provided however that
any such dividends will first be used to satisfy applicable fees and expenses,
and redemption requests from Investors that are accepted
by the Managing Member. Any distributions made by the Fund
are at the discretion of the Managing Member, considering factors such as the
Fund’s earnings, cash flow, capital needs and general
financial condition and the requirements of applicable law. As a result, the Fund’s distribution rates and payment frequency may vary from time to time.
Brief Overview of the Offering
The Units are being
offered on a continuous basis
commencing on the date of this Memorandum on a
best- efforts basis. Funds tendered
by Investors in the Offering will be released
immediately to the Fund on the relevant Dealing Day upon acceptance of a
subscription by the Managing Member and/or the Fund and after review and
approval by the Managing Broker. The Units are offered subject to acceptance,
prior sale, and withdrawal, cancellation, or modification of the offer at any
time without notice.
The
Offering is made on a “best efforts — no minimum” basis which means that the
Managing Broker and the participating brokers are only required to use their
best efforts to sell the Units. In a
best efforts offering, the Managing Broker is not guaranteeing the sale of a
certain number of Units, and will not purchase any outstanding Units. There is no requirement that any minimum
number of Units be sold before the gross subscription proceeds (“Proceeds”) are released to the Fund and
applied in its business. Therefore, there can be no assurance that any minimum
number of Units will be sold.
The
Units are offered
through Young America Capital, LLC1, a
registered broker/dealer and member FINRA/SIPC
(the “Managing Broker”). Upon receipt of the executed
acceptance of the Subscription Agreement
(the “Subscription Agreement”),
a copy of which has been enclosed as Appendix B, the Investor will deposit,
preferably via wire transfer (though checks will be accepted) the subscription
amount delivered directly to an account of the Fund, with such proceeds
available for use by the Fund in accordance with the terms and conditions of
the LLC Agreement immediately upon receipt.
Units may be
purchased at an initial
price per Unit indicated at the beginning of this Memorandum and
thereafter at their Net Asset Value per Unit on the
first Business Day of each month (a “Dealing Day”). For an initial purchase of
Units, a properly executed Subscription Agreement must be received by Cloud
Toronto – FYBN before 5:00 p.m. New York time at least five (5) Business Days prior to the Dealing
Day. Notifications received
less than five (5) Business Days prior to purchase
will be accepted solely at the Managing
Member’s discretion. For subsequent purchases, Units may be purchased on the first Business Day of each month
provided that the Managing Member received proper written notice before 5:00
p.m. New York time at least five (5) Business Days prior to the relevant
Dealing Day. Any payments submitted in the form of a transfer in kind will be executed
solely at the Managing Member’s
discretion and may require
additional notice. Payments for the purchase must be received by Cloud Toronto
– FYBN by 3:00 p.m. New York time at
least three (3) Business Days prior to the Dealing
Day and will be processed at the Net Asset Value as of the close of
business on the Dealing Day. In the event the Fund does not receive payment, in
whole or in part, by the designated time, the Investor will be liable to the
Fund for any related losses.
The Managing
Member may elect in its absolute discretion to accept subscription payments from prospective investors, in whole or in part, in specie or in kind rather than in cash.
This election may be made generally or in
any particular case. The Managing Member will use the same valuation procedures used in determining Net Asset Value
1 Information about
the Managing Broker
is available at FINRA’s BrokerCheck website: https://brokercheck.finra.org/.
to determine the value to be attributed to the relevant
assets to be transferred or assigned to the Fund as of the relevant Dealing Day. Any prospective investor seeking to
contribute assets will be responsible for all costs involved in changing the
ownership of and the transfer of the relevant assets unless the Managing Member
otherwise agrees. Upon receipt of properly completed subscription materials and
such legal and other transfer documentation as the Managing Member
and Cloud Toronto – FYBN in their
sole discretion may require, Cloud Toronto – FYBN will allot the requisite number of Units in
the normal manner. The Managing
Member reserves the right to decline to register any prospective investor
until the subscriber has been
able to prove title to the assets in question and make a valid transfer
thereof.
For purposes
of this Memorandum, a “Business
Day” is any day on which banks are open for business
in the United States and/or
such other day or days as the Managing Member may from time to time determine.
The
individual minimum subscription for Class B Units is Fifty Thousand Dollars ($250,000.00),
unless otherwise waived by the Managing Member. Subscriptions are subject to
acceptance or rejection by the Managing Member, in the Managing Member’s sole
and absolute discretion, subject to the terms and conditions of the
Subscription Agreement. Rejected
subscriptions and subscription funds will be returned to subscribers without
interest within thirty (30) days of rejection.
The date of this Memorandum is October
16, 2023.
TABLE OF CONTENTS
CAPTION PAGE
FREQUENTLY ASKED QUESTIONS……………………………………………………………………………………………………………………………….. 1
IMPORTANT GENERAL
CONSIDERATIONS………………………………………………………………………………………………………………….. 6
CONDITIONS TO RECEIVING THIS MEMORANDUM……………………………………………………………………………………………………. 8
FORWARD LOOKING
STATEMENTS……………………………………………………………………………………………………………………………. 9
WHO MAY INVEST; SUITABILITY STANDARDS………………………………………………………………………………………………………….. 10
PRIVACY NOTICE……………………………………………………………………………………………………………………………………………………… 13
SUMMARY OF OFFERING AND FUND TERMS…………………………………………………………………………………………………………… 14
CLOUD TORONTO – FYBN
EXECUTIVE SUMMARY…………………………………………………………………………………………………… 29
GENERAL RISK FACTORS………………………………………………………………………………………………………………………………………….. 33
INVESTMENT OBJECTIVES, STRATEGY, AND POLICIES……………………………………………………………………………………………… 60
MANAGEMENT………………………………………………………………………………………………………………………………………………………… 70
MANAGEMENT FEES AND COMPENSATION……………………………………………………………………………………………………………. 74
INDEMNIFICATION AND LIMITATION OF LIABILITY………………………………………………………………………………………………….. 78
DESCRIPTION OF UNITS…………………………………………………………………………………………………………………………………………… 79
CONFLICTS OF INTEREST………………………………………………………………………………………………………………………………………….. 83
AMENDMENTS TO LLC AGREEMENT……………………………………………………………………………………………………………………….. 86
TAX CONSIDERATIONS…………………………………………………………………………………………………………………………………………… 89
ERISA……………………………………………………………………………………………………………………………………………………………………….. 94
SUPPLEMENTAL SALES MATERIAL…………………………………………………………………………………………………………………………… 97
APPENDICES
A
– LLC Agreement
B
– Subscription Agreement
The following
questions and answers about this offering of equity securities (this “Offering”) highlight material
information regarding the Fund and this Offering. Each Investor should read
this Private Placement Memorandum (this “Memorandum”),
including the section entitled “Risk Factors,” before deciding to purchase the
equity securities offered hereunder.
Q: What is CLOUD TORONTO –
FYBN CORE+ GROWTH
& INCOME FUND LLC?
A: The Fund is a
distinguished New York limited liability company (LLC) established with the
primary objective of making strategic investments in a diverse portfolio of
real estate properties, gas stations, real estate-related equity investments,
including Real Estate Investment Trusts (REITs), and other real estate-related
assets. Guided by the Managing Member’s expertise and vision, The Fund seeks to
identify and invest in opportunities that offer an attractive risk-return
profile.
Investment Focus:
At The Fund, our investment
strategy is rooted in the belief that a well-diversified portfolio is essential
for sustainable growth and resilience in the real estate market. We target a
variety of assets and investment vehicles to achieve our objectives:
Real Estate Properties: We
selectively invest in a range of real estate properties, with a keen focus on
identifying promising market opportunities and high-potential properties.
Gas Stations: Recognizing the
importance of the energy and convenience retail sector, The Fund has a
strategic interest in gas station investments.
Real Estate-Related Equity
Investments: We actively explore opportunities in real estate-related equity
investments, including holdings in REITs, to harness the benefits of collective
real estate ownership.
Other Real Estate-Related
Assets: In addition to traditional investments, The Fund remains open to
exploring unique and innovative real estate-related assets, adapting to
changing market dynamics.
Continuous Offering:
The Fund is dedicated to
ensuring accessibility and inclusivity for potential investors. We offer three
distinct classes of limited liability company units on a continuous basis,
starting from the initial Dealing Day upon acceptance of subscriptions from
Participating Members. This approach allows investors to enter and exit the
Fund as they see fit, providing flexibility and convenience.
Mission:
Our mission at The Fund is to
maximize returns for our investors by carefully curating a diversified
portfolio that not only delivers strong financial performance but also manages
risks effectively. We are dedicated to delivering long-term value through informed
and strategic investments.
Conclusion:
The Fund is committed to the
pursuit of excellence in real estate investment. With a focus on diversity,
continuous offerings, and a strong commitment to risk management, we invite
potential investors to explore the opportunities presented by The Fund. Our
team of experts is here to guide you through the dynamic world of real estate
investments and deliver attractive risk-adjusted returns. Join us on this
journey as we build and manage a portfolio that aligns with your financial
objectives and aspirations.
Q: What assets will the Fund own?
A: The
purpose of the Fund is to acquire,
develop, manage, operate, lease, and sell, directly or indirectly, commercial
real estate properties consistent with the Fund’s investment strategy of
acquiring quality income- producing and value-add
commercial properties, which do not require significant development, that are either operated by Affiliates of the Managing Member
or unrelated third parties, and, in some circumstances, leased
under short term and long-term leases to creditworthy
tenants. The
Fund may also invest in: (i) equity interests in entities that have developed
and/or acquired quality income producing commercial properties and are either
operated by Affiliates of the Managing Member or unrelated third parties, (ii)
debt securities (e.g., promissory notes, mezzanine debt instruments) secured by
security interests in commercial properties, and (iii) in shares of publicly
traded real-estate investment trusts “REITs” (up to a maximum amount of
twenty-five (25%) percent of net assets the Fund) (“REIT Portfolio”).
Q: What are the major
risks to the
investment?
A: Investment in the Units of the Fund
offered hereby involves risk, including the risk
of a significant loss of the investment and the general economic failure of the
Fund. Some of these risks are described in more detail in the section labeled
“Risk Factors.”
Q: Who
will select the investments that the Fund will invest
into?
A: The Fund’s Managing Member is Cloud Toronto – FYBN Core+ Growth & Income Fund GP LLC, a New York limited liability
company. Investment decisions
of the Fund will be made by the Managing Member, although
the Managing Member may, at times, engage affiliated and third-party
investment managers to assist in these efforts.
Q: Who
is Cloud Toronto – FYBN ?
A: One
Sponsor of the Fund is Cloud Toronto – FYBN – The Wealth Development Company, a trade name
used to refer to a group of affiliated entities directly or indirectly
controlled by Cloud Toronto – FYBN Cos Inc., a New York corporation. Cloud
Toronto – FYBN is an alternative asset
manager, sponsor of private funds, and real estate developer. This Sponsor has
been involved in acquiring, managing, and disposing of real estate-related assets for over thirteen years.
See section “Cloud
Toronto – FYBN Executive Summary” for additional
information concerning Cloud Toronto – FYBN – The Wealth Development Company and a full
list of the Affiliates (defined herein) of Cloud Toronto – FYBN that are referenced above.
Q: What is the Fund’s
targeted rate of return?
A: The Fund will strive to acquire assets
at a discount to current market through core plus and value-add acquisition strategies. The Fund’s target
is to provide outsized risk-adjusted returns targeting a nine to fourteen percent (9% – 14%), fund-level internal
rate of return (IRR). There is no guarantee, however, that the
Fund will achieve these results and risks do exist that may result in a
significant or complete loss or your investment. The target returns
established by us take into consideration a variety of assumptions, and there
is no guarantee that the assumptions upon which the target returns are based
will materialize.
The Fund will pursue
real estate investment strategies generally categorized as “Core Plus“ and “Value Add”
which includes stabilization, re-tenanting, small renovations, adaptive re-use, and substantial renovations of
existing assets. Estimated returns are based on past performance of a
generalized core plus and value-add strategy.
Within commercial real estate investing, Core Plus and Value Add
investment opportunities are typically viewed as low to moderate risk
respectively. Further details on the
generally accepted real estate investment risk profiles are set out below.
What is a gas station investment?
A gas station investment involves purchasing or operating
a gas station with the expectation of generating a return on your investment.
What are the key factors to consider before investing in
a gas station?
Key factors include location, competition, financial
stability, and regulatory requirements.
Is it profitable to invest in a gas station?
Profitability depends on factors like location, management, and market
conditions. It can be profitable but isn’t guaranteed.
What are the different types of gas station investments?
You can invest in existing gas stations, buy a franchise,
or build a new station from the ground up.
How important is the location of a gas station?
Location is critical. High traffic areas with limited
competition are generally more profitable.
What licenses and permits are required to operate a gas
station?
The specific requirements vary by location, but typically include
business licenses, environmental permits, and safety certifications.
What are the typical operating costs for a gas station?
Operating costs include fuel purchases, employee
salaries, maintenance, utilities, and insurance.
How can I finance the purchase of a gas station?
You can finance a gas station through personal savings,
loans, or by partnering with investors.
What are the risks associated with gas station
investments?
Risks include fluctuating fuel prices, environmental
liabilities, and changes in consumer behavior.
How do I determine the value of a gas station?
The value is often based on factors like cash flow,
location, property value, and potential for growth.
Are there any environmental concerns associated with gas
station investments?
Yes, potential environmental contamination from fuel leaks is a concern.
Proper maintenance and compliance with regulations are essential.
Can I convert a gas station into another type of
business?
Converting a gas station into another business may be possible, but it
depends on local zoning regulations and structural considerations.
What is the typical return on investment (ROI) for a gas
station?
ROI varies widely, but a well-run gas station can provide
a reasonable return on investment over time.
What are the advantages of owning a franchise gas
station?
Franchise gas stations offer brand recognition, marketing
support, and established operational processes.
How can I attract customers to my gas station?
Offering competitive fuel prices, convenience store items, and loyalty
programs can help attract and retain customers.
Is it a good idea to buy a gas station with a convenience
store?
Combining a gas station with a convenience store can enhance
profitability as it offers additional revenue streams.
Are there tax benefits to owning a gas station?
Tax benefits may include deductions for operating expenses,
depreciation, and potential credits for environmental cleanup costs.
What is the typical lease structure for gas station
operators?
Lease structures vary, but they can include fixed rent,
percentage-based rent, or a combination of both.
How can I mitigate the risk of fuel price fluctuations?
Diversifying revenue streams, optimizing inventory management, and
monitoring fuel price trends can help mitigate this risk.
Is it possible to sell my gas station investment in the
future?
Yes, you can sell your gas station investment. The ease of sale and
potential profit depend on market conditions and the condition of your
business.
A “Core Plus” investment strategy typically involves properties that are
considered to be a step above core properties but still require some level of
active management to achieve their full potential. While whether a gas station
property qualifies as “Core Plus” depends on various factors, here are some
considerations:
Location: A gas station’s location is critical. If it is in a prime,
high-traffic area with strong demographics and limited competition, it may
qualify as Core Plus.
Property Condition: The condition of the gas station property matters.
If it is well-maintained and up-to-date, it may be more likely to be classified
as Core Plus.
Income Stability: Gas stations with consistent and predictable income,
such as long-term tenant leases, may be more appealing as Core Plus
investments.
Potential for Value-Add: Properties with untapped potential, such as the
ability to expand the convenience store, add additional services, or optimize
operations, can qualify as Core Plus if they offer opportunities for value
enhancement.
Market Trends: Consider the current and future market trends for gas
stations in the area. Is there a growing demand for fuel and convenience store
services?
Regulatory Compliance: Ensure that the gas station complies with all
environmental, safety, and zoning regulations. Properties that have already
addressed potential regulatory issues may be more attractive.
Lease Terms: If there are long-term lease agreements in place with
reputable tenants, it can enhance the property’s Core Plus status.
Financial Performance: Evaluate the historical financial
performance of the gas station. A property with a track record of generating
consistent income may be viewed more favorably.
Competitive Analysis: Assess the competitive landscape. If the gas
station has a competitive advantage, such as offering unique services or having
strong brand recognition, it may qualify as Core Plus.
Exit Strategy: Consider your exit strategy. A Core Plus property should
have the potential for capital appreciation over time, allowing you to sell it
at a higher value.
It’s important to note that the classification of a property as Core,
Core Plus, or any other category can vary depending on individual investment
criteria and market conditions. Investors and real estate professionals
typically use these categories as a general guideline, but the specific
classification of a property should be based on a comprehensive analysis of its
unique attributes and potential.
Before classifying a gas station property as Core Plus, it’s advisable
to consult with real estate experts and conduct thorough due diligence to
determine if the property aligns with your investment goals and risk tolerance.
The Company, FYBN Gas Station Investment Fund Systems, is
a gas station / cstore developer focused on artificial intelligence, machine
learning, and deep learning processing for research, government, and corporate
organizations.
The Company is subject to a number of significant risks that could
result in a reduction in its value and the value of the Company Securities,
potentially including, but not limited to:
Inability of the Company to complete an initial public offering of its
securities, merger, buyout or other liquidity event, Inability to expand and
maintain market acceptance for the Company’s services and products in the
United States,
Inability to gain access to international markets and
comply with all applicable local laws and regulations,
Rapidly changing consumer preferences and market trends,
Inability to achieve management’s projections for growth, to maintain or
increase historical rates of growth, or to achieve growth based on past or
current trends,
Inability to develop, maintain and expand successful marketing
relationships, affiliations, joint ventures and partnerships that may be needed
to continue and accelerate the Company’s growth and market penetration,
Difficulties in managing rapid growth effectively,
Inability to keep pace with rapid industry, technological and market
changes that could affect the Company’s services, products and business,
Potential costs and business disruption that may result if the Company’s
customers complain or assert claims regarding the Company’s technology,
Failure to adequately address data security and privacy concerns in
compliance with U.S. and international laws, rules and policies,
Technological problems, including potentially widespread outages and
disruptions in Internet and mobile commerce, Performance issues arising from
infrastructure changes, human or software errors, website or third-party
hosting disruptions, network disruptions or capacity constraints due to a
number of potential causes including technical failures, cyber attacks, security
vulnerabilities, natural disasters or fraud,
Inability to adequately secure and protect intellectual
property rights,
Potential claims and litigation against the Company for infringement of
intellectual property rights and other alleged violations of law, Difficulties
in complying with applicable laws and regulations, and potential costs and
business disruption if the Company becomes subject to claims and litigation for
legal non-compliance, Changes in laws and regulations materially affecting the
Company’s business,
Liability risks and labor costs and requirements that may
jeopardize the Company’s business,
Ongoing need for substantial additional capital to support operations,
to finance expansion and/or to maintain competitive position, Issuance of
additional Company equity securities at prices dilutive to existing equity
holders, Dependence on and inability to hire or retain key members of
management and a qualified workforce, Potential significant and unexpected
declines in the value of Company equity securities, including prior to, during,
and after an initial public offering, and Other risks that are not generally
disclosed or known, in part because the Company is privately held and does not
provide risk disclosure in publicly available reports. In addition, the gas
station / cstore industry is highly competitive, and the Company may not be
able to compete effectively against the other businesses in its industry. The
Company faces competition from a large number of competitors, including EXXON
MOBIL, CHEVRON, BP, SHELL and Other Private Operators and Owners Like Quik
Trip, WAWA, etc, some of which have longer operating histories, significantly
greater financial, technical, marketing, distribution and other resources and
greater name recognition than the Company does. These and other companies may
develop new services and products and marketing and distribution channels in
advance of the Company or establish business models or technologies disruptive
to the Company’s business. Moreover, current and future competitors of the
Company may also make strategic acquisitions or establish cooperative
relationships among themselves or with others. By doing so, they may increase
their ability to meet the needs of customers and potential customers. To the
extent that the Company is not able to compete successfully against current and
future competitors, the Company’s business, results of operations and financial
condition may suffer. It is impossible for anyone to know with any certainty which
of the companies will be more successful than the others, and an investment
will be subject to all of the risks inherent in any investment in a nascent
business and industry with a number of different competitors.
The business of the Company and investment in the Company Securities may
also be jeopardized by stagnant economic conditions and by political,
geopolitical, regulatory, financial and other developments in the United
States, Europe, China, the Middle East and elsewhere around the world,
including incidents of war and terrorism, outbreaks and pandemics of serious
communicable diseases such as COVID-19 and Ebola, and natural and man- made
disasters that are beyond the Company’s control and could disrupt its business
and adversely affect its performance and financial condition.
Investing
in CLOUD TORONTO – FYBN Gas Station Investment Funds, which have over 400 gas
stations in Georgia and a software platform that covers over 1000 cities in the
state, presents an intriguing opportunity in the gas station business. Here are
some key points to consider:
Diversification: With over 400 gas stations
in Georgia, your investment is well-diversified across locations and markets,
reducing the impact of any single market’s fluctuations on your overall
portfolio.
Market
Coverage:
The software platform covering over 1000 cities in Georgia can provide valuable
data and insights to optimize the gas station operations, such as pricing
strategies, inventory management, and marketing efforts.
Profitability: The gas station business
typically operates on thin profit margins, but a 40 – 45% profit range suggests
efficient operations and potentially competitive advantages in terms of
pricing, product offerings, or services.
Cash
Flow: The
heavy cash flow nature of the business can be advantageous for investors,
providing a consistent stream of income that can be reinvested or distributed
as returns.
Operational
Intensity:
It’s important to recognize that gas stations are highly operational- intensive
businesses. Proper management, maintenance, compliance with regulations, and
customer service are critical for success.
Economies
of Scale:
Having a significant number of gas stations in the portfolio may allow for
economies of scale in procurement, marketing, and management, potentially
increasing profitability.
Market
Stability:
Georgia’s gas station market may be relatively stable due to consistent demand
for fuel and essential goods, making it less susceptible to economic downturns.
Exit
Strategy:
Consider your exit strategy. A well-managed portfolio of gas stations can be
attractive to potential buyers or investors looking for stable income streams.
Risk
Management:
Despite the potential rewards, it’s important to assess and manage risks
associated with gas station investments, including environmental compliance,
competition, fuel price fluctuations, and regulatory changes.
Due
Diligence:
Before investing, conduct thorough due diligence on the specific gas stations
in the portfolio. Evaluate their locations, market conditions, financial
performance, and any potential value-add opportunities.
Tax
Considerations:
Work closely with tax professionals to understand the tax implications of your
investment, including depreciation, deductions, and any tax credits available
in Georgia.
Professional
Management:
Consider whether the investment funds have experienced and professional
management in place to oversee the operations, maintenance, and strategic
direction of the gas station portfolio.
Long-Term
Strategy:
Determine whether your investment aligns with a long-term strategy, as the gas
station business can provide stable income over an extended period.
Before
making any investment, consult with financial advisors and conduct a
comprehensive analysis to ensure that it aligns with your investment goals,
risk tolerance, and financial strategy. Additionally, seek legal and financial
advice to fully understand the terms and conditions of your investment in FYBN
Gas Station Investment Funds.
Q: What management fees will be paid to the Managing Member or
its Affiliates?
A: The
various management fees paid encompass the costs of ensuring a competent
management team is in place making
decisions daily for sourcing, acquiring, and providing oversight for the Fund’s
assets. Please refer to the section
labeled “Management Fees and Compensation”.
Q: What is the per Unit purchase
price?
A: After their initial issue, the Units
will be sold at the then-current “Net Asset Value” or “NAV”, which is generally
the prior month’s NAV per unit for such class, plus applicable upfront selling commissions and Managing
Broker Dealer Fees as further described below.
Q: How
is the NAV per Unit calculated?
A: The
per Unit NAV of the Fund is calculated by Cloud Toronto – FYBN each month, based on the net asset values of
the Fund’s investments (including the REIT
Portfolio), with the addition of any other assets (e.g., cash on hand), and the
deduction of liabilities.
Properties
held by the Fund will be valued at least once per year. The Managing Member,
however, at its sole and absolute discretion, can revalue properties held by
the Fund more frequently. In valuing these investments, Cloud Toronto
– FYBN has implemented a valuation
process that is commonly utilized in the real estate investment industry by
completing multi-year forecasts on each underlying asset, making assumptions on
future financing activities, and applying industry accepted discount factors to
achieve a valuation via discounted cash flow (DCF) analysis. Cloud Toronto –
FYBN may also obtain third-party
appraisals for comparison purposes to the DCF results.
The
REIT Portfolio will be valued using readily available market quotations. If a market quotation is not readily
available or is deemed unreliable, or if an event that is expected to affect
the value of a security occurs after the close of the principal exchange or
market on which that security is traded, and before the close of the New York
Stock Exchange, the fair value of a security will be determined in good faith
under policies and procedures established
by and under the
supervision of Cloud Toronto –
FYBN . Further details
are set out below under “Net Asset Value Determination
and Valuation Policy.”
Q: Where will the Fund buy
properties?
A: The
Fund will select
markets for acquisitions based on simple
criteria we’ve defined
as “growth markets.”
In choosing specific geographic areas, the Fund seeks a long-term trend
toward population growth,
evidenced by a recent
track record that extends a minimum of 10 years.
Q: What is the anticipated life cycle of the Fund?
A: The Fund is being offered on a
continuous open-end basis. In an
open-end fund structure, an Investor may request redemptions of their units on
a quarterly basis, but the Fund is not obligated to redeem any Units and may
choose to redeem only some, or even none, of the Units that have been requested
to be redeemed in any particular quarter in the Managing Member’s
sole and absolute
discretion. While the Managing Member may consider a liquidity event at any time in the
future, the Managing Member does not currently intend to undertake such
consideration for three to five years from each individual asset purchases, and
the Fund is not obligated by its LLC Agreement or otherwise to affect a
liquidity event at any time.
Q: What will the Fund do with the money raised in this offering?
A: The funds raised in this offering
will primarily be utilized to purchase
and renovate real estate related
assets, and operate those assets for cash flow and value growth. On a temporary basis, the Fund may also lend a small portion of its total capital to real estate
related assets with the goal of earning interest on not-yet-deployed capital.
Q: Who can buy Units?
A: An Investor may buy Units pursuant to
this Memorandum if you are an “Accredited Investor” as described in the
offering memorandum. See section entitled “Who
May Invest; Suitability Standards.”
Q: Is
there any minimum investment required?
A: Yes.
Generally, an Investor must invest at least $250,000. Fund management has the
discretion to accept a lower minimum investment amount.
Q: How
do I subscribe?
A: Securities are offered
through Young America Capital, LLC, a registered broker/dealer and member FINRA/SIPC.
Prospective investors who would like to subscribe for the Units must
carefully read this Memorandum. If, after carefully reading the entire
Memorandum, obtaining any other information available and being fully satisfied
with the results of pre-investment due diligence activities, a prospective
investor would like to purchase Units, they must complete and sign a Subscription Agreement and any supporting documentation as requested. The Subscription
Agreement submission process is managed by the Managing Broker. An example of
the Subscription Agreement a prospective investor would complete is attached as
Appendix B. An investor must purchase at least the minimum purchase amount of $250,000
(subject to the other provisions contained in this Memorandum) and the full
purchase price must be wired to the Fund upon submission of the completed
Subscription Agreement. Instructions for completing the Subscription Agreement
will be provided by Cloud Toronto – FYBN or the Managing Broker, along with detailed
instructions for making payment via wire transfer.
As part of the subscription process, prospective investors are required
to provide a third-party verification of their accredited investor
status. The Managing
Broker will request
this verification as a part of, or separate from,
your completed Subscription Agreement. Acceptance of the prospective
Investor’s subscription by the Fund is at the Managing Member’s sole and absolute discretion, and the Fund will notify each prospective Investor of receipt and
acceptance of
the subscription. In the event the Fund does not accept a prospective
Investor’s subscription for the Units for
any reason, the Fund will promptly
return the funds to such subscriber in accordance with the terms of this Memorandum.
Q: If an Investor buys Units
in this Offering, how may the Investor
later sell them?
A: There
is no current market for the Units. The Fund and the Managing Member do not
expect that a public market will ever develop, and the Fund’s
Certificate of Formation
does not require
a liquidity event
at a fixed time in the
future. Therefore, redemption of Units by the Fund,
which must be agreed to by the Managing Member in its sole
and absolute discretion, will likely be the only way for an Investor to dispose
of its Units.
Q: Will an Investor be notified of how its investment is doing?
A: Yes.
The Fund will strive to provide each Investor with periodic updates
on the performance of its investment
in the Fund, including (except for certain items such as K-1 tax statements,
each of these shall be provided in the discretion of the Managing Member):
·
An investor update letter,
distributed quarterly;
·
An annual report;
·
An annual audit; and
·
An annual Form K-1 tax statement.
Q: When will an Investor
receive detailed tax information?
A: Every
effort shall be made to furnish each Participating
Member with its IRS Form K-1 for the preceding year by March 31st of
each fiscal year. Due to the
unpredictable nature of tax preparation timing, primarily by third parties who the
Fund may rely on to provide
a K-1, Fund Management advises all Investors to extend their tax filing deadlines each year.
Q: What is the anticipated timing
of distributions for this Fund?
A: While the Fund expects that
distributions will be made following deployment of the Proceeds, there may be
a delay in the receipt of cash flow from invested capital that is available for
regular distribution during the first 2-3 years of the Fund. Even then, timing of distributions will be dependent
on the status of the projects and cash needs of
the Fund, and it is not anticipated
that any amounts will be available for distribution
until a significant number of the projects that the Fund invests into
are fully stabilized (i.e., a
significant number of tenants (ninety percent (90%)+ based on rentable square
footage for any given project) have commenced using the property and are paying
rents).
Q: Who
can help answer questions?
A: Questions and requests for information may be directed
to:
970
Peachtree Industrial Blvd, Suite 1-2, Suwanee, GA 30024
408 856 5031
email: di.mo@cloudtoronto.us
IMPORTANT GENERAL
CONSIDERATIONS
This
Memorandum does not constitute an offer to sell or a solicitation of an offer
to buy by anyone in any state in which the offer or solicitation is not
authorized or in which the person making the offer or solicitation is not
qualified to do so, to any person to whom it is unlawful to make the offer or
solicitation, or to any person other than the offeree to whom this Memorandum
has been delivered (each an “Offeree” and
collectively, the “Offerees”).
No
dealer, salesperson, or other person has been authorized in connection with
this Offering to give an Offeree any information or make any representation other
than those contained in this Memorandum and, if given or made, that information or representations may not be relied upon. Each Offeree
is advised to conduct its own thorough investigation of the Fund and
the terms of the Offering, including the merits and risks involved, before
making an investment in the Units. This Memorandum supersedes in its entirety
any preliminary transaction summary or term sheet, or any other
oral or written information heretofore delivered to each Offeree. Prior to the sale of the securities, the Fund is hereby providing
each Offeree the opportunity to ask questions and to obtain any additional
information concerning the Fund and the terms and conditions of the Offering
that the Offeree wishes to obtain.
The securities offered in connection with this Memorandum are being offered
and will be sold in reliance on the exemption from the registration
requirements of the Securities Act provided in section 4(a)(2) and Rule 506 of
Regulation D to a limited number of investors that are “Accredited investors”
within the meaning of Rule 501(a) of Regulation D under the Securities Act.
This investment is suitable only for subscribers of substantial net worth that are willing,
and have the financial
capability, to bear the economic risk of an investment for an indefinite period
of time. There is no public trading market for the securities, nor is it contemplated
that one will develop in the foreseeable future. Any transfer or resale of the Units or any interest or
participation therein will be subject to restrictions under the Securities Act
and as provided in the LLC Agreement.
Purchasers
of the Units will be required to make (pursuant to the Subscription Agreement
and investor questionnaire, copies of which are attached hereto as Appendix B)
certain acknowledgments, representations, and agreements upon initial
issuance, including representations with respect to their net
worth or income and their authority to make this investment, as well
as representations that they are familiar with and understand the terms,
conditions, and risks of this offering.
Certain of the terms
of the LLC Agreement, Subscription Agreement, and other documents delivered herein are described
in this Memorandum. These descriptions do not purport
to be complete, and each summary description is subject to, and qualified
in its entirety by reference to, the actual text of the relevant document. Any
purchase of Units should be made only after a complete and thorough review of
the provisions of this Memorandum, the LLC Agreement, and the remaining
documents delivered hereto. In the event that any of the terms, conditions or
other provisions of the LLC Agreement are inconsistent with or contrary to the
description of terms in this Memorandum, the LLC Agreement will govern.
An investment in the Units involves
a high degree of risk. An independent investigation should be undertaken
by each subscriber regarding the suitability of his, her or its investment in
the Units.
Offerees
are not to construe the contents of this Memorandum, or any information made
available as described
below as legal or tax advice. Each subscriber
should consult his, her or its’ own counsel, accountant, business, and
financial advisors as to legal, tax, and related matters concerning the
purchase of the Units.
The market,
financial, and other
forward-looking information presented in this Memorandum represents the subjective views of the Managing
Member and is based on assumptions the Managing Member
believes are reasonable but that may or may not prove to be correct.
There can be no assurance
that the Managing
Member’s views are accurate
or that the Managing Member’s estimates will be realized. Nothing in this Memorandum is or should be relied on as
a promise as to the future performance or condition of the Fund. Industry experts
may disagree with these assumptions and with the Managing Member’s
view of the market and the prospects for the Fund.
In
purchasing the Units, custodians, trustees, and other fiduciaries of an
individual retirement account (“IRA”) or simplified employee
pension (“SEP”) qualifying under
Section 408 of the Internal
Revenue Code of 1986, as
amended (the “Code”), KEOGH plans, and
retirement plans as described in Title I of the Employee Retirement Income
Security Act of 1974, as amended (“ERISA”)
(collectively, “Qualified Plans”) should
consider the possible application of ERISA and related
provisions of the Code, as well as whether
an investment by a Qualified
Plan in the Fund would be permissible under the governing instruments
of the Qualified Plan. The Department of Labor has issued regulations which affect the type of investments in which Qualified
Plans may invest,
including investments in companies such as the Fund. Less than
twenty-five (25%) percent of the total number of Units sold will be sold to
Qualified Plans, and transfer of the Units to Qualified Plans will be
restricted so that less than twenty-five (25%) percent of the Units outstanding
at any time will be owned by Qualified Plans.
Offerees
whose authority is subject to legal investment restrictions should consult
their own legal advisors to determine whether, and if so, to what extent, the
Units will constitute legal investments for them.
This
Memorandum presents information with respect to the Fund as of the date
hereof. The delivery of this Memorandum at a time after the date on the cover does not imply that the information herein
is correct as of any time
subsequent to that date.
Each
Offeree of the Units and its representatives and beneficial owners, if any, are
invited to ask questions concerning
the terms, conditions, and other aspects of this
Memorandum and to obtain any additional information with respect to the Units,
the Fund, and the Managing Member
that they deem necessary or
advisable to supplement or to verify
the accuracy of the information contained herein and, in the case of documents referred
to herein, to request
that such documents be made available.
NASAA UNIFORM DISCLOSURE
IN
MAKING AN INVESTMENT DECISION, INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE ISSUER AND THE TERMS OF THE OFFERING, INCLUDING
THE MERITS AND RISKS INVOLVED. THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY
ANY FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED
THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS DOCUMENT. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
THESE
SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT
AS PERMITTED UNDER THE SECURITIES ACT, AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO
REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY MAY BE
REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE
PERIOD OF TIME.
FLORIDA RESIDENTS
IF
SALES ARE MADE TO FIVE OR MORE PERSONS IN FLORIDA, AND YOU PURCHASE SECURITIES
HEREUNDER, THEN YOU MAY VOID SUCH PURCHASE EITHER WITHIN THREE DAYS AFTER THE
FIRST TENDER OF CONSIDERATION IS MADE BY YOU TO THE ISSUER, AN AGENT OF THE
ISSUER, OR AN ESCROW AGENT OR WITHIN THREE DAYS AFTER THE AVAILABILITY OF THIS
PRIVILEGE IS COMMUNICATED TO YOU, WHICHEVER OCCURS LATER.
By accepting delivery of this Memorandum, each Offeree understands and agrees to comply with the
following:
·
the information contained herein is confidential;
·
the Offeree
will not make any photocopies of this Memorandum or any related
documents;
·
the Offeree
will not distribute this Memorandum or disclose any of its contents to any persons
other than to those persons, if any, that the Offeree retains to advise the Offeree
with respect to its contents;
·
the Offeree
will review this Memorandum, including statistical, financial, and other numerical
data, with the Offeree’s
legal, regulatory, tax, accounting, investment, or other advisors. Neither the Fund nor the Managing Member intends in this
Memorandum to furnish
legal, regulatory, tax, accounting, investment, or other
advice;
·
the Managing Member may reject any offer to purchase
Units, in whole or in
part, for any reason or no reason;
and
·
if an Offeree
does not purchase Units or if the Offering is
terminated, on request of the Fund or the Managing Member, the Offeree will
return this Memorandum and all attached documents to the Managing Member.
This Memorandum has been prepared for use by a limited
group of accredited investors to consider
the purchase of Units. The Fund reserves the right to modify or
terminate the Offering process at any time.
Information
contained in this Memorandum contains “forward-looking statements.” Forward-
looking statements reflect the Fund’s current expectations or forecasts of
future events. Forward-looking statements can be identified by words such as “will,”
“believes,” “expects,” “may,”
“should,” or “anticipates” or the negative
thereof or other variations thereon or comparable terminology, or by discussions of strategy. The matters identified in the “Risk Factors” section constitute
cautionary statements identifying important factors with respect to
forward-looking statements, including certain risks and uncertainties. Other
factors could also cause actual results to vary materially from the future
results covered in the forward-looking statements contained herein.
Any projections, estimates, or other forecasts contained in this Memorandum are forward-looking statements that have been prepared
by the Fund and are based on assumptions that the Fund believes are reasonable. Projections are necessarily speculative in
nature, and it can be expected that some or all of the assumptions underlying
the projections will not materialize or will vary significantly from actual results.
Accordingly, the projections are only an estimate. Actual results may, and most
likely will, vary from the
projections, and the variations may be material.
Statements in this Memorandum relate only to events as of the date on which the statements are made. None of
the Fund, the Managing Member or any of their respective Affiliates (defined herein)
has any obligation to update or
otherwise revise any projections, including any revisions to reflect changes in
economic conditions
or other circumstances arising after the date
hereof or to reflect the occurrence of unanticipated events, even if underlying
assumptions do not come to fruition.
The Fund is offering
and selling the Units in reliance on an exemption from the registration requirements of the
Securities Act and state laws. Accordingly, distribution of the Memorandum has
been strictly limited to persons believed meet the requirements set forth
below. Participation in the Offering is limited to Accredited Investors who
make the representation set forth below and furnish supporting documentation as
is requested by, and acceptable to, the Fund. The Fund reserves the right, in
its sole and absolute discretion, to reject any subscription based on any
information that may become known or available to it about the suitability of
an Investor or for any other reason, or no reason.
As
investment in the Units involves a high degree of risk and is suitable only for
persons of substantial financial means who have no need for liquidity in this
investment. Only Investors who (i) represent in writing that they meet the Investor
suitability requirements set
herein and as many be required under
federal or state law, and
(ii) supply the Fund with acceptable Accredited Investor verification
documentation, as requested by the Fund, may acquire the Units. The Fund has
the right to and will rely on the written representations an Offeree makes and
supporting information supplied by an Offeree. Each Offeree must provide
truthful and accurate information.
The
Investor suitability requirements stated below represent minimum suitability
requirements established by the Fund. However, an Offeree’s satisfaction of
these requirements will not necessarily mean that the Units are a suitable investment for the Offeree,
or that the Fund will accept the Offeree as an investor. Furthermore, the Managing Member may modify those
requirements in its sole and absolute discretion, and any modification may
change the suitability requirements for investors.
You (as the Offeree)
must represent in writing that you meet, among other, all of the following requirements (the “Investor
Suitability Requirements”).
(a)
You have received, read, and fully understand the Memorandum and are basing your
decision to invest on the information contained in the Memorandum. You have
relied only on the information contained in the Memorandum and have not relied
on any representations made by any other person;
(b)
You understand
that an investment in the Units involves substantial risks and you are fully cognizant of and understand all of the risks
relating to an investment in the Units,
including those risks discussed in the “Risk Factors” section of the
Memorandum;
(c)
Your overall
commitment to investments that are not readily marketable is not
disproportionate to your individual net worth, and your investment in the
Units, will not cause such overall commitment to become excessive;
(d)
You have adequate means
of providing for your financial requirements, both current and anticipated, and have no need
for liquidity in this investment;
(e)
You can bear
and are willing to accept the economic risk of losing your entire investment in
the Units;
(f)
You are acquiring the Units for your own account and for investment purposes only and have
no present intention, agreement or arrangement for the distribution, transfer,
assignment, resale, or subdivision of the Units;
(g)
You have sufficient knowledge
and experience in financial and business matters
that you are capable of evaluating the
merits of investing in the Units and
have the ability to protect your own Units in connection with this investment;
and You are an “Accredited Investor” as defined in Rule 501(a)
of Regulation D under the Securities Act.
An “Accredited investor” is any:
(a)
Natural person
that has (i) individual net worth (as defined below),
or joint net worth with his or her
spouse or spousal equivalent, of more than $1,000,000; or (ii) individual income in excess
of $200,000, or joint income with his or her spouse or spousal
equivalent in excess of $300,000, in each of the two most recent years and has
a reasonable expectation of reaching the same income level in the current year;
(b)
Natural person that is a
holder of (i) a General Securities Representative license (Series 7); (ii) a
Private Securities Offerings Representative license
(Series 82); or (iii)
an Investment Adviser
Representative license (Series 65).
(c)
Corporation, Massachusetts or
similar business trust, partnership, limited liability company or organization
described in Code Section 501(c)(3) of the Internal Revenue Code (the “Code”), not formed for the specific
purpose of acquiring Units, with total assets over $5,000,000;
(d)
Trust with total assets over $5,000,000, not formed for
the specific purpose of acquiring Units and whose purchase is directed
by a person who has such knowledge
and experience in financial and business matters
that he or she is capable of evaluating the merits and risks of an
investment in Units as described in Rule 506(b)(2)(ii) under the Securities
Act;
(e)
Broker-dealer registered under Section 15 of the Exchange Act, as amended;
(f)
Investment adviser registered
pursuant to Section 203 of the Investment Advisers Act of 1940 or registered
pursuant to the laws of a state;
(g)
Investment adviser relying on
the exemption from registering with the Commission under Section 203(l) or (m)
of the Investment Advisers Act of 1940;
(h)
Investment company registered
under the Investment Company Act or a business development company (as defined
in Section 2(a)(48) of the Investment Company Act);
(i)
Small business investment
company licensed by the Small Business
Administration under Section 301 (c) or (d) of the Small Business Investment
Act of 1958, as amended;
(j)
Rural Business Investment
Company as defined in Section 384(A) of the Consolidated Farm and Rural
Development Act;
(k)
An employee benefit plan
within the meaning of ERISA, if the investment decision is made by a plan fiduciary (as defined in Section 3(21) of ERISA),
which is either
a bank, savings and loan association, insurance company, or registered investment advisor, or if the employee
benefit plan has total assets
in excess of $5,000,000 or, if a self-directed plan, with
investment decisions made solely by persons who are Accredited Investors;
(l)
Private business development
company (as defined in Section 202(a)(22) of the Investment Advisors Act of
1940, as amended);
(m)
Bank as defined in Section
3(a)(2) of the Securities Act, any savings and loan association or other
institution as defined in Section
3(a)(5)(A) of the Securities Act whether acting in its individual or fiduciary capacity, or any insurance company as
defined in Section 2(a)(13) of the Securities Act;
(n)
Plan established and
maintained by a state, its political subdivisions, or any agency or
instrumentality of a state or its political subdivisions, for the benefit of
its employees, if such plan has total assets of more than $5,000,000;
(o)
Entity in which all of the
equity owners are Accredited Investors. If
you rely on this section, you are required to have each equity owner
of that entity complete an Investor Questionnaire to certify the owner’s status as an Accredited Investor.
(p)
Entity of a type not listed
in Sections (d) – (o), not formed for the specific purpose of acquiring Units,
owning investments in excess of $5,000,000.
(q)
A “family office,” as defined
in rule 202(a)(11)(G)-1 under the Investment Advisers Act of 1940 (17 CFR
275.202(a)(11)(G)-1): (i) with assets under management in excess of $5,000,000;
(ii) that is not formed for the specific purpose of acquiring Units; and (iii)
whose prospective investment is directed by
a person who has such knowledge and experience in financial and business matters
that such family
office is capable
of evaluating the merits
and risks of the prospective investment.
(r)
A “family client,” as defined
in rule 202(a)(11)(G)-1 under the Investment Advisers Act of 1940 (17 CFR 275.202(a)(11)(G)-1),
of a family office meeting the requirements in Section (q) above and whose
prospective investment in the issuer is directed by such family office pursuant
to (r)(iii) above.
For purposes
of calculating your net worth, “net worth” means the excess
of total assets
at fair market value (including personal and real property but excluding the estimated fair market value
of a person’s primary home) over
total liabilities. Total liabilities exclude
any mortgage on the primary
home in an amount of up to the home’s estimated
fair market value as long as the mortgage was incurred more than 60 days before
the securities were purchased but includes (i) any mortgage amount in excess of
the home’s fair market value and (ii) any mortgage amount that was borrowed during
the 60-day period
before the closing
date for the sale of securities for the
purpose of investing
in the securities. In the case of fiduciary accounts, the net worth and/or
income suitability requirements must be satisfied by the beneficiary of the account,
or by the fiduciary, if the fiduciary
directly or indirectly provides funds for the purchase of the Units.
In addition, the SEC has issued certain
no action letters
and interpretations in which it deemed certain
trusts to be Accredited Investors, such as a trust where the trustee is
a bank as defined in Section 3(a)(2) of the
Securities Act and revocable grantor trusts established by individuals who meet
the requirements of clause
(a) or (b) of the first sentence of paragraph (h) of the
Investor Suitability Requirements. However,
these no-action letters and interpretations are fact
specific and should not be relied upon without
close consideration of your unique circumstance.
The Fund and the Managing
Member value each Offerees privacy
and are providing this Privacy
Notice as a courtesy to each of the Offerees.
The
Fund and the Managing Member do not disclose nonpublic personal information
about Offerees and Investors to third parties other than as described below.
The
Fund and the Managing Member collect
information about each Offeree (such as name, address, social security number,
assets, and income) from discussions with the Offerees and Investors, from
documents that may deliver to the Fund and the Managing Member (such as the
Subscription Agreement) and in the course of providing services to Investors
and Offerees. In order to service an Investor’s account and effect the
transactions described herein, the Fund and the Managing Member may provide an
Offeree’s personal information to our Affiliates and to firms that assist us in
servicing an Investor’s account and have a need for such information, such as
any fund administrator, investor relations administrator, auditors, or accountants. The Fund and the
Managing Member do not otherwise
provide information about Offerees and Investors to outside firms,
organizations, or individuals except as required or permitted by law. Any party that receives this information will use it only for the services
required and as allowed by applicable law or
regulation and is not permitted to share or use this information for any other
purpose. Notwithstanding the above,
the Managing Member and the Fund will have no liability to an Offeree
or Investor to the
extent that the information described
above becomes publicly
known, except to the extent that
the Managing Member’s or the Fund’s actions constitute gross negligence
or willful misconduct.
California law requires certain
data security requirements of Personal Information by covered businesses and grants residents of California certain rights with respect
to obtaining information about their personal data that is maintained by a covered
business. The Fund and the Managing Member will comply
with these requirements. Among other rights, California law permits residents
of California to opt-out of certain disclosures of Personal Information to third parties. In some circumstances, any person may elect to
opt-out of the sharing of his, her or its Personal Information with third parties
and may do so by submitting a request in writing or by contacting the Fund by telephone.
This summary highlights some of the most significant information contained elsewhere in this Memorandum. Because it is a summary, it
does not contain all of the information that may be important to a potential investor. To understand
this offering fully, a potential investor should read the entire Memorandum
carefully, including, without limitation, the information discussed under the caption “Risk Factors” before
making a decision
to invest in the Units. Unless specifically noted otherwise, references throughout this Memorandum to the Fund will include
the Managing Member (as defined below) and any agent authorized to act
on the Fund’s behalf.
The Fund: |
The Fund is a New York limited liability company formed on November
30, 2022. The Fund operates as a pooled
investment that will (i) offer and sell limited liability company units in
the Fund to certain high net worth and qualified investors in exchange for
capital subscriptions from the investors, and (ii) use the proceeds contributed by the investors to acquire, indirectly through
its investment in the REIT Subsidiary, and one or more holding companies (the
“Holding Companies”) a diversified portfolio of income producing real estate
assets with potential value growth. |
Managing Member: |
The Managing Member
is a limited liability company organized in the State of New York on November 30,
2022. The Managing Member is responsible for all management decisions of the Fund.
The Managing Member is not registered as an investment advisor. |
Principals: |
Dilip Mooparakath and Darshana Somaiya are the directors of the Board of Directors of Cloud Toronto –
FYBN Cos. and authorized to act on behalf of Cloud Toronto – FYBN Cos. Dilip Mooparakath and Darshana Somaiya together are the parties
empowered to act on behalf of the Sponsor and the Managing Member (collectively,
the “Principals”). |
Affiliates: |
An affiliate with reference to the Fund
or Managing Member
includes such entity’s officers, directors, members, partners,
shareholders, managers, employees, agents, and the Principals (collectively
the “Affiliates”). |
Investment Strategy: |
The Fund’s
primary investment objectives are:
·
to acquire: o quality income-producing and value-add
commercial properties, which do not require significant development, that are either
operated by Affiliates of
the Managing Member or unrelated third parties, and, in some circumstances,
leased under short term and long-term leases to creditworthy tenants;
o equity interests in entities that have
developed and/or acquired quality income producing commercial properties and
are either operated by Affiliates of the Managing Member
or unrelated third parties; |
o debt securities (e.g., promissory notes,
mezzanine debt instruments) secured by security interests in commercial
properties; and
o shares of publicly traded REITs. No more than twenty-five (25%) percent of
the Fund’s assets will be invested in REITs (“REIT Portfolio”).
|
The above-listed activities may be changed or modified by the Managing Member in its sole and absolute
discretion. |
Investment Risks: |
The Fund’s investment strategy is speculative and entails
substantial risks, including, among others: dependency on key individuals,
risks associated with real estate investing, litigation risk, risks arising from the use of leverage, and
the risk that
exit strategies from positions may be unavailable and have limited
liquidity. The use of leverage, in particular, can exacerbate potential
losses suffered by the funds. An Investor should not invest in the Fund
unless: (1) it is fully
able to bear the financial risks of its
investment for an indefinite period of time; and (2) it can sustain the loss
of all or a significant part of its investment and any related realized or
unrealized profits. |
The Units: |
A general description of the rights and preferences of the
Units is set forth below. Each Investor should carefully read this Memorandum
and the LLC Agreement to understand certain risks associated with acquiring
Units and the rights and obligations associated with the Units.
Class B Units – The holders of Class B Units are entitled to participate
in the income and profit
of the Fund,
subject to the Managing Member Performance Allocation. The Class B Units will have limited
voting rights, as described further in this Memorandum.
The Class
B Units will
be subject to a Managing Member Performance
Allocation (as further described below) of twenty (20%) percent.
Managing
Member Units – The Managing Member intends to
make capital contributions equal at least one (1%) percent of the capital
contributions of all of the Participating Members. The Managing Member may make a capital contribution to the
Fund no less frequently than semi-annually, so that the Managing Member
capital contribution equals at least one (1%) percent of the capital
contributions of all of the Participating Members. The Managing Member shall
receive Managing Member Units in return for such capital contributions. Cloud Toronto – FYBN Cos or other
affiliates of the Managing Member wishing to make capital contributions to
the Fund shall also receive Managing Member Units.
The Fund will receive dividends from the REIT Subsidiary as further described in the REIT
Supplement. Subject to receipt of such dividends, the Managing Member intends
to declare and make periodic distributions to Members, provided however that
any such dividends will first
be used to satisfy applicable fees and expenses, and redemption requests from Investors that
are accepted by the Managing Member. Any distributions made
by the Fund are at the discretion of the Managing Member, considering factors such as the Fund’s
|
|
earnings, cash flow,
capital needs and general financial condition and the requirements of applicable law.
As a result, the Fund’s
distribution rates and payment frequency may vary from time to time. |
The Offering: |
The Units
are being offered
on a continuous basis
commencing on the date of this Memorandum. Funds
tendered by Investors in the Offering will be released immediately to the Fund on the relevant Dealing Day upon acceptance of a subscription by the Managing Member and/or the Fund and after review and approval by the Managing Broker. The Units
are offered subject to acceptance, prior sale, and withdrawal,
cancellation, or modification of the offer at any time without notice.
The Units are offered through Young America Capital, LLC, a
registered broker/dealer and member FINRA/SIPC (the “Managing Broker”). Upon receipt of the executed acceptance of the Subscription
Agreement (the “Subscription Agreement”), the Investor will deposit,
preferably via wire transfer (though checks will be accepted), the
subscription amount which
will be delivered directly to an account of the Fund, with such proceeds
available for use by the Fund in accordance with the terms and conditions of
the LLC Agreement immediately upon receipt. A copy of the Subscription Agreement has been
enclosed as Appendix B.
The Offering is made on a “best efforts-no minimum” basis
which means that the Managing Broker and the participating brokers are only
required to use their best efforts to sell the Units. In a best efforts
offering, the Managing Broker is not
guaranteeing the sale of a certain number of Units,
and will not purchase any
outstanding Units. There is
no requirement that any minimum number of Units be sold before the Proceeds
are released to the Fund and applied in its business. The Fund is offering to sell any combination of Participating
Units with a dollar value. |
Selling Commissions: |
The
Fund will engage duly licensed and registered broker-dealers to assist with
its offer and sale of Units. The Partnership may engage and terminate such broker-dealers as it determines necessary, and the
Fund may determine the amount of compensation to be paid
to such broker- dealers. The Fund has initially entered into an agreement with Young America
Capital, LLC, a Florida limited liability company (“Skyway”),
as its managing broker-dealer. Skyway is a broker-dealer registered with the
Securities and Exchange Commission and other necessary state or other
regulators, and a member of the Financial Industry Regulatory Authority Inc.
(“FINRA”).
Certain
employees of Cloud Toronto – FYBN Services, LLC, an New York limited liability
company (“Services”), an affiliate
of the Fund, will be registered representatives of Skyway (“Affiliated Agents”). Skyway will pay sales commissions to Affiliated Agents
for their sale
of Units. Affiliated Agents
may perform other services on behalf of Services that are not part of such
Affiliates Agents’ relationship with Skyway and not involving the offer and
sale of securities.
Please
note that Affiliated Agents with Cloud Toronto – FYBN Cos (but who are
licensed and managed through Skyway) will receive selling commissions up to two (2.00%) percent
of the subscription proceeds in the Offering from the sale
of Class B Units. Other
fees that will
be
|
paid to Skyway include a
Managing Broker Fee of 0.7% of the gross offering proceeds from the sale of
Units attributable to Skyway.
The Fund and/or Managing
Broker may also enter into selling agreements with third-party FINRA licensed
broker-dealers (“Soliciting Broker”),
pursuant to which such Soliciting Brokers will assist with placing other
Classes of Units.
Below is a
summary of the Managing Broker Dealer Fees and sales commission limits
permitted under the LLC Agreement:
Managing Broker Dealer
Fees |
Class B Units |
Managing Broker
Dealer Fee:
(based on gross
assets raised attributable to the Managing Broker Dealer) |
0.7% |
Sales Commissions
(based on transaction value)
(to be paid to duly licensed Affiliated Agents of the
Managing Broker-Dealer and who are also
affiliated with the Managing Member) |
up to
2% |
Marketing Reallowance (based on transaction value) (to be paid
to Selling Group
Members of the |
Up to 1% |
Individual Minimum Investment Amount:
The individual
minimum subscription for Class B Units is Fifty Thousand Dollars ($250,000),
unless otherwise waived by the Managing Member. Subscriptions are subject to
acceptance or rejection by the Managing Member, in the Managing Member’s sole
and absolute discretion, subject to the terms and conditions of the
Subscription Agreement. Rejected subscriptions and subscription funds will be returned
to subscribers without
interest within thirty
(30) days of rejection.
Special Tax or
Regulatory Parallel Funds:
The Managing
Member may, in its discretion, create additional partnerships or other vehicles
(“Parallel Funds”), for Investors
with special investment needs, including Investors with special legal,
regulatory, tax or other requirements. The Parallel Funds generally will invest
side-by-side with the Fund on substantially the same terms and conditions as the Fund, including the sharing of organizational and other Fund expenses. The Parallel
Funds may contain different terms and conditions than the Fund.
Calculation of Net
Asset Value: |
The NAV per Unit of the Fund is calculated by Cloud Toronto –
FYBN each month, based on the net
asset values of the Fund’s investments (including the REIT
Portfolio), with the addition of any other assets (e.g., cash on hand), and
the deduction of liabilities.
Properties held by the Fund will be valued at least once per
year. The Managing Member, however, at its sole and absolute discretion, can
revalue properties held by the Fund more frequently. In valuing these
investments, Cloud Toronto – FYBN has
implemented a valuation process that is commonly utilized in the real estate
investment industry by completing
multi-year forecasts on each underlying asset, making assumptions on future financing activities, and applying industry
accepted discount factors to achieve
a valuation via
discounted cash flow
(DCF) analysis. Cloud
Toronto – FYBN may
also obtain third-party appraisals for comparison purposes to the DCF results. The REIT Portfolio will be valued using readily available
market quotations. If a market
quotation is not readily available or is
deemed unreliable, or if an event that is expected to affect the value
of a security occurs after the close of
the principal exchange or market on which that security is traded, and before
the close of the New York Stock Exchange, the fair value
of a security will be determined in good
faith under policies and procedures established by and under the supervision
of Cloud Toronto – FYBN . Further details are set out below under “Net Asset
Value Determination and Valuation Policy.” |
Fund Term: |
The Fund is being offered on a continuous basis. While the
Managing Member may consider a liquidity event at any time in the
future, the Managing Member does not currently intend to undertake such
consideration for three to five years from each
individual asset purchase, and the Fund is not
obligated by its charter, its LLC Agreement, or otherwise to effect a
liquidity event at any time. |
Diversification: |
The Fund does not have fixed guidelines for diversification
and may concentrate its investments in particular types of real estate
investments and may utilize different investment strategies, depending on the Managing Member’s
assessment of the available investment opportunities, including only
purchasing a single property. |
NAV Capital Accounts: |
The Fund will establish and maintain on its books a capital
account (“NAV Capital Account”),
for each Member and the Managing Member, into which their capital
contribution(s) (each a “Capital
Contribution”), will be credited and in which
certain other transactions will be reflected as
further described in the LLC Agreement. |
Management Fee: |
The Managing Member will be entitled to receive compensation in the form of an ongoing “Asset Management Fee.” The Asset
Management Fee with respect to the Participating Units shall be accrued
for and payable monthly in arrears, equal to one-twelfth (1/12th) of the
annualized fee of one and one half (1.5%) percent of the Net Asset Value of
the Participating Units as of the close of business on the last Business Day of the relevant month
calculated before deduction of theAsset Management Fee, or any accrued
but unallocated Managing Member Performance Allocation and before any
withdrawals. |
|
All Participating Members’ NAV Capital Accounts (as defined herein) will pay the Asset Management Fee on a pro rata
basis, which can be waived, rebated or shared with another person in the
Managing Member’s absolute discretion. No Asset Management Fee shall be
payable with respect to the Managing Member Units. |
Managing Member Performance Allocation: |
The
Managing Member shall be entitled
to receive an allocation (the “Managing
Member Performance Allocation”) from the Fund equal to twenty (20%)
percent of the Total Return, subject to a seven (7%) percent Hurdle
Amount, and a High-Water Mark (each as defined below). Such allocation will
be measured on a calendar year basis (the “Performance Period”), accrued monthly and paid annually.Managing
Member Units will not be subject to any Managing Member Performance
Allocation. Hurdle Amount
The
Fund employs a Hurdle Amount which represents a level of return that the Fund
must achieve before the Managing Member is entitled to the Managing Member
Performance Allocation. The
“Hurdle Amount” for any
Performance Period means an
amount that results in a seven
(7%) percent annualized internal rate of
return (“IRR”) on the Net Asset Value of the Units outstanding at the
beginning of the relevant Performance Period and all Units issued since the
beginning of such Performance Period, taking into account the timing and
amount of all distributions accrued or paid (without duplication) on all such
Units and all issuances of Units over the Performance Period and calculated
in accordance with recognized industry practices. The
ending Net Asset Value of the Units
used in calculating the IRR will be calculated on a gross
basis (i.e., before giving effect to any allocation/accrual to the Managing Member Performance Allocation). For the avoidance of doubt, the
calculation of the
Hurdle Amount for any period will exclude any Units
redeemed during such period, as redeemed Units will
be subject to the Managing Member Performance
Allocation upon their redemption as described below.
Loss Carryover and High Watermark The High
Watermark is a measure utilized by the Fund
to ensure that the Managing Member Performance Allocation is only charged when at the end of the Performance
Period, the Fund’s value is above its previous highest level at the end of a
prior Performance Period (the “High Water
Mark”), so as to avoid
the Managing Member
being paid again for making back
prior gains. So, if the overall return
of the Fund is negative, then the Fund must
make up the shortfall (the “Loss
Carryover Amount”) in the next year, or later years, before another
Managing Member Performance Allocation will be allocated.
The Loss
Carryover Amount shall
initially equal zero
and shall cumulatively
increase by the absolute value of any negative Total Return in a Performance Period and decrease by any positive Total |
Return in a Performance Period. The Loss Carryover Amount shall at no time be less than zero.
The calculation of the Loss Carryover
Amount will exclude
the Total Return related
to any Units redeemed during the Performance Period, as such Units will be subject to the Managing Member
Performance Allocation upon redemption. The amount by which Total Return falls below the Hurdle Amount will not be
calculated for the purposes of the Loss Carryover
Amount and will be carried
forward to subsequent periods.
The effect of the loss
Carryover Amount is that past annual Total Return losses must be gained back
and so offset the positive annual Total Return for purposes of the calculation of the Managing
Member Performance Allocation. The Managing Member will also be
allocated a Managing Member Performance Allocation with respect to all Units that are redeemed
at the end of any quarter (in connection
with redemptions of Units) in an amount calculated as described above with the
relevant Performance Period being pro-rated to the portion of the year for which
such redeemed Units were outstanding, and proceeds for any such redemption will be reduced
by the amount of any such Managing Member
Performance Allocation applicable to those redeemed Units.
Allocation of Excess Profits
and the Managing
Member Performance Allocation
The Managing Member will be
allocated the Managing Member Performance Allocation in an amount equal to:
If the Total Return
for the Performance Period exceeds
the sum of:
(i) the Hurdle
Amount for that Performance Period;
and
(ii) the Loss Carryover Amount
(any such excess,
“Excess Profits”),
One hundred (100%) percent of
such annual Excess Profits until the total amount allocated to the Managing
Member equals twenty (20%) percent of the sum of (x) the Hurdle Amount for that
Performance Period and (y) any amount allocated to the Managing
Member pursuant to this clause
(the “Catch-Up”); and
To the extent there are remaining
Excess Profits, twenty
(20%) percent of such remaining Excess Profits.
The “Total Return” for the Performance Period shall equal the sum of:
(i) all distributions accrued or paid (without duplication) on the Units outstanding at the end of such period since the beginning of the Performance
Period (ii) the change in aggregate Net Asset Value of such Units since the
beginning of the Performance Period, before giving effect to (x) changes
resulting solely from the proceeds of issuances of Units, and (y) any
allocation/accrual to the Managing Member Performance Allocation.
|
For
the avoidance of doubt, the calculation of Total Return will (i) include any
appreciation or depreciation in the Net
Asset Value of the
Units issued during the then current Performance Period but (ii) exclude the
proceeds from the initial issuance of such Units. |
Allocation of Income,
Gain and Loss: |
Income, expense, gain and loss
of the Fund will generally be allocated
pro-rata among Members’ NAV Capital Accounts. |
Transaction Fees: |
The Managing Member or any of its Affiliates may also be paid fund formation, management, and other fees
as would be paid in the normal course of business, including,
without limitation, in connection with accounting, property management,
leasing, acquisition, maintenance and construction margin, development and
disposition of properties acquired by the Fund; provided, however, any fees
paid by the Fund to the Managing Member or its Affiliates for the provision
of such services shall be no greater than the Fund would pay to an unaffiliated
third party providing such services in either (i) Maricopa County, New York, for services provided to the Fund
as a whole, or (ii)
the county and state
where any Fund property is located, for
services provided in connection with a specific Fund
property. |
Fund Expenses: |
The Fund shall pay or reimburse the Managing Member (or its
Affiliates) for certain Organizational and Operating Expenses, and
Underwriting Expenses and Other Expenses (in each case as defined below) incurred or paid on behalf of the Fund
or the REIT
Subsidiary prior to or after the formation of the Fund and the REIT
Subsidiary. The aggregate amount of the Organizational and Operating expenses
will not exceed one percent (1%) of the total Capital Contributions of all Participating Members of this Offering as of the
termination of this Offering (the “O&O Expense
Cap”). The amount of any Organizational and Operating Expenses incurred on behalf of the Fund or the REIT Subsidiary shall be accrued
and at the end of each calendar quarter the Managing Member
shall determine the amount of any new Capital Contributions over such
period, and the Fund shall reimburse
the Managing Member accordingly, up to the amount of the O&O Expense
Cap.“Organizational and Operating Expenses” include, but are not limited to (i) legal fees for preparing Fund
and REIT Subsidiary organizational documents and related agreements and
resolutions, (ii) organizational expenses of the Fund (i.e., fees, costs and
expenses of and incidental to the formation, qualifications to do business
and fund raising of the Fund (iii) due diligence expenses (including travel
and marketing expenses of the Managing Member, its affiliates and agents);
(iv) technology processing platforms; (v) filing fees; (vi) marketing due
diligence fees including third party due diligence reports; (vi) sales team travel, seminars, and broker
dealer conferences; (vii)
training and education
meetings for registered representatives of our participating broker-dealers
(viii) permissible forms of non-cash compensation to registered
representatives of our participating broker-dealers (in each case to the
extent consistent with Cloud Toronto – FYBN Cos internal policies and procedures).“Underwriting and Other
Expenses” include, but
are not limited
to: (i) underwriting fees and expenses (subject to applicable FINRA |
|
limitations)
including without limitation, travel and entertainment expenses; (ii)
the Management Fee and affiliate fees including, but not
limited to, accounting expenses, acquisition and disposition, loan placement
and loan guaranty, construction and development fees and the Managing Member Performance Allocation; (iii) taxes payable
by the Fund (iv) interest and other expenses relating to any Fund
indebtedness; (v) bonding expenses; (vi) premiums for insurance protecting
the Fund and the partners and employees of the Managing Member and its affiliates and other persons
entitled to indemnification from the Fund from
liabilities to third parties for activities on behalf of the Fund; (vii) fees
incurred by the Fund for special advisory or consulting services; (viii)
the legal and other fees, costs and expenses
of and incidental to the purchase and sale (including qualification and
registration) of portfolio assets, including fees associated with the
development and management of portfolio properties (payable at then- current market rates in the
Managing Member’s discretion), (ix) banking, dead deals, registration,
qualification, depositary, custodial and similar fees and expenses; (x)
transfer, capital and other taxes, duties and costs incurred in acquiring, holding,
selling and otherwise disposing of Fund assets; (xi) costs and expenses of
the tax matters partner; and (xii) all extraordinary fees, costs and
expenses; (xii) the accounting fees, costs and expenses of the Fund and the
REIT Subsidiary, including without limitation, the annual audit of the Fund and the REIT Subsidiary (as applicable), (xiii) the
preparation of the annual and any
interim financial statements of the Fund
and the REIT Subsidiary and the federal and
state tax returns of the Fund and the REIT Subsidiary; (xiv) costs and
expenses associated with meetings of the Members, communications with Members
and preparation of Fund status reports; (xv) costs and expenses associated
with informal meetings of Members
with the Managing Member and of committees
of the Fund, including costs
and expenses of the Advisory Board; (xvi)
indemnification costs and expenses, and the legal fees, cost and expenses of
counsel for the Fund in any legal action, proceeding or investigation,
including any threatened action, proceeding or investigation, and the amount
of any judgments or settlements paid in
connection with such action, proceeding or investigation; (xvii) the fees,
costs and expenses relating to the evaluation, purchase, holding and sale of
portfolio assets, including (without limitation) expenses related to due diligence and other fees
and expenses, including salaries of Cloud Toronto – FYBN Cos employees with respect
to work attributable to investments made by the Fund, (xviii) all other legal
fees, costs and expenses incident to the Fund,
its management and activities; (xix)fees incurred by the Fund for special
advisory or consulting services; and (xx)
costs and expenses associated with the dissolution and winding up of the
Fund. |
Side Letters: |
The Managing Member
has the absolute discretion to create
additional classes of Units from time to time without notice to the
existing Members and may vary the terms of this Memorandum with respect to any Member and may enter into confidential
side letters or other similar agreements (“Side Letters”), with certain Members and may issue confidential
supplements to this Memorandum related to such Members which are not provided or disclosed to other Members. Such terms may waive
or modify the application of any provision of the LLC Agreement with respect to such Member, without obtaining
the consent of or giving notice
to any other Member; provided, however |
|
that any such Side Letter will not adversely impact the rights
of the other Investors. Terms
may differ according to the types
of investment strategies
employed, carried interests charged, Managing Broker Dealer Fees, minimum and maximum subscription amounts,
Investor eligibility requirements and
in other respects in the complete and sole discretion
of the Managing Member. |
Fiscal Year: |
The fiscal year of the Fund shall end on December 31 of each
year (each a “Fiscal Year”), which
Fiscal Year may be changed by the Managing Member, in its sole and absolute
discretion. |
Borrowings: |
The Managing Member believes in utilizing leverage in a
moderate fashion. Considering this leverage strategy, the Managing Member
intends to follow the restrictions described below under “Investment Objectives, Strategy, and Policies” with
respect to the use of leverage.
No such restrictions are expressly described in the LLC Agreement, and the
Managing Member is under no obligation to follow such guidelines. |
Reports to Members: |
Any Member or its respective designated representative shall
have the right, at any
reasonable time, to have access to and inspect and copy the contents of books and
records of the Fund; provided, however, that
confidential communications between the Fund and its legal counsel may be
withheld from a Member in the Managing Member’s reasonable discretion.
In addition, all Members will receive the information
necessary to prepare federal and
state income tax returns following
the conclusion of such Fiscal Year as soon thereafter as is reasonably
practical. In addition to annual
financial statements, the Managing Member
intends to provide Members with quarterly reports showing the
performance of the Fund’s investments.
The Managing Member may agree to provide Members with
additional information on the underlying investments of the Fund, as well as access to the Managing Member and its employees for relevant
information. |
Redemptions and Redemption Fee: |
Lockup
Participating
Members may request redemptions of their Units as of the last
Business Day of each
quarter (a “Redemption Date”) upon at least 60 days’ prior written notice to the Managing
Member. The Managing Member is
under no obligation to agree to any such redemption request and may choose to
redeem only some, or even none, of the Units that have been requested to be
redeemed in any particular quarter in its sole discretion. In addition, Participating
Members are not permitted to make redemptions of Units until one (1)
year after the issuance of the relevant Units, subject to waiver in the sole
discretion of the Managing Member (the “Lockup”).
The ability
of the Managing Member to fulfill
redemption requests is subject to a number of limitations.
As a result, redemptions of Units may not be available during
a given quarter. To the extent
the Managing
Member agrees to choose to redeem Units in a particular quarter, it will only
redeem Units as of the opening of the Redemption |
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Date.
Redemptions will be made at the Net Asset Value per Unit on the relevant
Redemption Date. Redemption Fee
If
a Class B Member requests a redemption of any portion of their Units
following the expiration of the Lockup applicable to such Member’s Units,
the amount of any such redemption proceeds paid to the Member
will be reduced by a fee (the “Redemption
Fee”) as further described below.
The amount
of any Redemption Fee with respect to a Class
B Member that requests a
redemption of any portion of their Units shall be calculated by reference to
a percentage of the Net Asset Value attributable to such Class B Member’s
redeemed Units, as follows:
·
Redemptions in months 13 – 24: 3% Fee ·
Redemptions in months 25 – 36: 2% Fee ·
Redemptions in months 37 – 48: 1% Fee Thereafter, no Redemption Fee shall be applied to a
redemption by a Class B Member.
Processing Fee Class
B Members requesting a redemption of their Units after the expiration of the Lockup and any applicable Redemption Fee will bear
a processing fee of $500
which will be deducted from any redemption proceeds received by such
Member.
Limits on Aggregate Redemptions The
aggregate Net Asset Value of total redemptions of all classes of Units is
limited to no more than five (5%) percent of the Fund’s Net Asset Value per
calendar quarter (measured using the average aggregate Net Asset Value
as of the end of the immediately preceding three months). In the event
that the Managing Member determines to redeem some but not all of the Units submitted for redemption during any quarter, Units redeemed at the end of the quarter will
be redeemed on a pro rata
basis. All unsatisfied redemption requests must be resubmitted after the
start of the next quarter. |
Transferability of Units: |
There is no current market for the Units. The
Fund and the Managing
Member do not expect that
a public market
will ever develop, and the Fund’s Certificate of Formation does
not require a liquidity event
at a fixed time
in the future.
Therefore, a redemption of Units by the Fund, which must be agreed to by the
Managing Member in its sole and absolute discretion, will likely be the only
way for an investor to dispose of its Units. While the redemption program of
the Fund was designed to allow investors to request redemptions of an
investor’s Units, the Funds ability to fulfill redemption requests is subject
to a number of limitations.
Most significantly, the majority of the Fund’s
assets will most likely consist of real estate assets which cannot generally be
readily liquidated without impacting the Fund’s ability
to realize full value |
|
upon disposition of such assets. As noted above, any
redemption requests by an investor will require the approval of the Managing
Member, which may be withheld in its sole
and absolute discretion and may be subject to Redemption Fees. As a result, an
investor’s ability to have its Units
redeemed by the Fund
may be limited, and the Units should be considered a long-term
investment with limited liquidity. Also, under the LLC Agreement, the
Managing Member can unilaterally redeem out a Member from its Units in its
sole and absolute discretion. The Managing Member
does not intend
to exercise its right to
force a redemption of a Member except in very limited circumstances involving
a Member who is causing significant disruption to the Fund as whole. |
ERISA and
Other Employee Benefit Plans and Accounts: |
Pension, profit-sharing or other employee benefit plans that
are subject to Title
I of the Employee Retirement Income Security Act of 1974,
as amended (“ERISA”),
individual retirement accounts, Keogh Plans or other plans covered by
Section 4975 of the Internal Revenue Code of 1986, as
amended (the “Code”), and entities
deemed to hold the plan assets of each of the foregoing (each a “Benefit Plan Investor”), governmental plans, foreign employee benefit plans
and certain church plans not subject to ERISA (such plans which are
not Benefit Plan Investors are referred to herein as “Other Benefit Plans”), may generally purchase Units in the Fund
subject to the considerations described in this Memorandum. The Managing
Member intends to conduct the operations of the Fund so that the assets of
the Fund will not be considered
“plan assets” of any plan investor. Fiduciaries of Benefit Plan Investors and
Other Benefit Plans are urged to review carefully the matters discussed in this Memorandum and consult with their own legal and financial
advisors before making an investment decision.
If requested by any tax-exempt Investors that are ERISA or
governmental pension funds,
the Managing Member
will facilitate the formation of a group trust through
which those pension funds would invest in the Fund. The group trust, and not
the Investors would be expected to report and pay the federal income taxes
resulting from unrelated business taxable income generated by the Fund.
Investors subject to ERISA should
consult their own advisors as to the effect of ERISA on an investment in the Fund.
The Managing Member will make reasonable efforts to
conduct the affairs and operations of the company in such a manner that the Fund will qualify as a
venture capital operating company under ERISA. |
Certain Tax Considerations: |
Income or gain of the Fund may be subject
to withholding tax, income
tax or other tax in the jurisdictions where investments are located. Each
Investor is advised to consult its own tax advisor as to the tax
consequences of an investment in the Fund, including the application of state
and local tax laws. |
Voting Rights
and Amendments: |
The voting rights
of Members are very limited. Other than as explicitly
set forth in the LLC Agreement, Members have no voting rights as to the Fund or
its management.Generally speaking, the
LLC Agreement may only be amended by the
consent of the Managing Member and the Members holding a majority |
|
of the outstanding Units, provided however, the Managing
Member may amend the LLC Agreement in certain other
times. See Section 15.20 of the LLC Agreement for a full
list of items
that may allow
the Managing Member to unilaterally amend the LLC Agreement. |
Liability of Members: |
Except as otherwise expressly required by law, a Member, in
its capacity as such, shall have no liability in excess of (i) its obligation
to pay the purchase price
for its Units under the LLC Agreement and (ii) as otherwise required under New York Law. No Member shall be personally liable for
any debts or obligations of the Fund. |
Other
Activities of Managing Member and
its Affiliates: |
Neither the Managing Member nor its Affiliates is required to manage
the Fund as their sole and exclusive function. Each may engage in other
business activities, including competing ventures and/or other unrelated
employment. In addition to managing the Fund, the Managing Member and its
Affiliates may establish other private investment funds in the future which
employ an investment strategy similar to that of the Fund. |
Exculpation and Indemnification: |
The Managing Member will be
generally liable to third
parties for all obligations of the Fund to the extent such obligations
are not paid by the Fund or are not by their terms limited to recourse
against specific assets. The Fund (but not the Members individually) is
obligated to indemnify the Managing Member and its managers and members from any claim, loss, damage,
or expense incurred by such persons
relating to the business of the Fund,
provided that such
indemnity is otherwise not prohibited by law. |
Termination: |
Upon termination, the Fund shall be dissolved and wound-up.
The Managing Member or, if there is no Managing Member, a liquidator or other
representative (the “Representative”), appointed by a majority of the interest of the Members
shall proceed with the orderly sale or liquidation of the assets
of the Fund
and shall apply
and distribute the proceeds of such sale or
liquidation in the following order of priority,
unless otherwise required by law: (i) first, to pay all expenses of
liquidation; (ii) second, to pay all creditors of the Fund (including Members
who are creditors) in the order of priority provided by law or otherwise;
(iii) third, to the establishment
of any reserve which the Managing Member
or the Representative may deem necessary; and (iv) fourth, to the Members
or their legal
representatives in accordance with the liquidation
distribution provisions set forth above. |
Advisory Board: |
The Fund shall
have an “Advisory Board” consisting of at least three members (the “Advisory Board Members”) appointed by
the Managing Member; provided, however, that all of the of the Advisory Board
Members shall be Members or their designated representatives. Subject to the
foregoing, the Managing Member may, in its sole and absolute discretion,
increase the size of the Advisory Board. Any Advisory Board Member may, at
any time, resign from the Advisory Board or be removed, with or without
cause, by the Managing Member. All such appointments, designations,
resignations, and removals shall be effective upon notice to the Fund.
The Managing Member
shall consult with
the Advisory Board, but the Advisory Board shall have no authority
to manage the Fund. |
No Registration Rights: |
The Units will not be registered under the Securities Act and
the Members will not have any registration rights associated with their
respective Units. |
How to Subscribe: |
Securities are offered through the Managing Broker, a
registered broker/dealer and member FINRA/SIPC.
Prospective investors who would like to subscribe for the
Units must carefully read this Memorandum. If, after carefully reading the entire Memorandum, obtaining any
other information available and being fully satisfied with the results of
pre-investment due diligence activities, a prospective investor would like to
purchase Units, they must complete and sign a Subscription Agreement and any supporting documentation, as requested. The Subscription Agreement submission process is managed by the Managing Broker. An example
of the Subscription Agreement a prospective investor would complete is
attached as Appendix B. An investor must purchase at least the minimum purchase amount of $250,000 (subject to the other provisions contained in this Memorandum)
and the full purchase price must be paid upon submission of the completed
Subscription Agreement. Instructions for completing the Subscription
Agreement will be provided by the Managing Dealer,
along with detailed instructions for
making payment via wire transfer.
As part of the subscription process, prospective investors are required to provide
a third-party verification of their accredited investor status.
This is a regulatory requirement and therefore, if the investor fails to
produce the necessary third-party verification, their subscription must be
rejected. The Managing Broker will request this verification as part
of, or separate from, your completed Subscription Agreement. Acceptance of
the prospective Investor’s subscription by the Fund is in the Managing Member’s sole and absolute discretion, and the Fund
will notify each prospective Investor of receipt and acceptance of the
subscription. In the event the Fund does not accept a prospective Investor’s
subscription for the Units for any reason, the Fund will promptly return the
funds to such subscriber in accordance with the terms of this Memorandum. |
Eligible Investors: |
In order to invest in the Fund,
an Investor must
meet certain minimum eligibility requirements,
including qualifying as an “Accredited Investor,” as defined in Section
4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), and Regulation D promulgated thereunder. The
Subscription Agreement sets forth in detail the definitions of an Accredited
Investor. An Investor must check the appropriate places in the Subscription
Agreement to represent to the Fund that it is an Accredited Investor and
submit to the Fund and the Managing Broker any third-party verification of
such Accredited Investor status as determined needed by the Fund and the
Managing Broker, in order
to be able to purchase Units. The Managing Member may reject any Investor’s subscription for any reason
or for no reason. |
Inquiries: |
Each Investor is invited to, and it is highly recommended that
an Investor, meet with
the Managing Member
for a further explanation of the
terms and conditions of this offering and to obtain any additional
information necessary to verify the
information contained in this Memorandum, to the extent the Managing Member
possesses such |
information or can acquire it without unreasonable effort or
expense. Requests for such information should be directed to:
970 Peachtree
Industrial Blvd, Suite 1-2, Suwanee, GA 30024
408 856 5031
Email: di.mo@cloudtoronto.us
CLOUD TORONTO – FYBN EXECUTIVE SUMMARY
Cloud Toronto – FYBN Executive Summary
Cloud Toronto –
FYBN provides high net worth individuals
and the investment advisers who serve them access to sophisticated, private
real estate investments that have been traditionally reserved for institutions.
Cloud Toronto –
FYBN ’s mission is to build wealth for and with their clients while
transforming the assets and communities they touch.
Cloud Toronto –
FYBN achieves this mission by providing
well-structured residential, commercial, and hospitality real estate
investments, utilizing, to the extent beneficial to the investment project as a
whole, a vertically integrated business model that includes acquisitions, development,
construction, asset management and disposition.
Key Items on Cloud Toronto – FYBN :
·
As of 2023, Cloud Toronto –
FYBN is celebrating its 13th year since.
·
For the 8-year period
from 2013 through
2021, Cloud Toronto – FYBN experienced 41% weighted average
annual net growth in aggregate capital invested from
outside investors in its various investments.
·
Cloud Toronto –
FYBN ’s accredited investor
base is growing since 2017.
·
Cloud Toronto – FYBN has launched and exited several multi-asset,
discretionary private real estate funds, single-asset private debt and equity
offerings in its operating history.
Cloud Toronto –
FYBN is an established Alternative
Investment Sponsor and fund manager specifically focused on the Greater
Southwest and Southeast Growth Region,
with an investment team designed
to execute on ground-up
development and repositioning of existing, middle-market, real estate assets
(generally $1m – $500m in project
value), and with an institutional-grade administrative infrastructure designed to support a large base of investors and multiple funds,
Cloud Toronto – FYBN believes it is well
positioned to manage the Fund.
For financial reporting purposes, Cloud Toronto – FYBN , as represented by the legal
entity Cloud Toronto – FYBN Cos Inc., consolidates some assets
within its management or ownership, as required by generally accepted
accounting principles (GAAP).
To that extent, some of the capital or assets the
company manages are including within the consolidated financial statements and
some of the capital or assets are eliminated as required by GAAP.
Cloud Toronto – FYBN ’s Competitive Strengths:
Creating Access
Cloud Toronto –
FYBN focuses on creating wealth for its
clients by providing access to high quality real estate investments. Cloud
Toronto – FYBN believes that capital
organized privately into structured funds offers investors an optimal balance
of risk-adjusted return and investment performance. By allowing investors, who
may not otherwise be able to purchase a large asset, to participate with a
minimum investment as low as $250,000, Cloud Toronto – FYBN provides typical real estate investors access
to sophisticated strategies and assets that they may not otherwise have.
Vertical Integration
While Cloud Toronto – FYBN ’s business
model is in part analogous to that of a financial
asset manager, their model is built on a full- service approach. They have complemented traditional asset management functions with a hands-on
approach to real estate investing. Specifically, Cloud Toronto – FYBN employs in-house experts in asset management,
leasing, construction management, development, finance, and capital formation. Their model is designed to leverage the
scale of best-in- class third party
service providers, such as general contractors and property managers, which
maintain the control of hands-on management – such as Cloud Toronto – FYBN ‘s
construction management professionals and asset managers.
Extensive relationships and sourcing network
Cloud Toronto –
FYBN leverages its real estate services
businesses in order to source deals for their funds. In addition, management
has extensive relationships with major industry participants in each of the
markets in which they currently operate. Their local presence and reputation in
these markets have enabled them to cultivate key relationships with major
holders of property inventory, in particular, financial institutions,
throughout the real estate community.
Targeted market
opportunities
Cloud Toronto –
FYBN focuses on markets that have a long-term trend of population growth and income improvement in states with business and
investment-friendly governments. Cloud Toronto – FYBN generally avoids engaging in direct
competition in over- regulated and saturated markets.
Structuring expertise
and speed of execution
Prior real
property acquisitions completed by Cloud Toronto – FYBN have taken a variety of forms, including
direct property investments, joint ventures, participating loans and
investments in performing and non-performing mortgages with the objective of
long-term ownership. Cloud Toronto – FYBN believes they have developed a reputation of
being able to quickly execute, as well as originate and creatively structure
acquisitions, dispositions, and financing transactions.
Focus on the middle
market
Cloud Toronto –
FYBN ’s focus on middle market
opportunities offers their investors significant alternatives to active,
equity investing that provide
attractive returns to investors. This focus has allowed them to offer a
diversified range of real estate investment opportunities, particularly for
accredited investors. While Cloud Toronto – FYBN will often enter into large projects, it
breaks those projects into phases to allow middle-market participants to
invest.
Risk protection and investment discipline
Cloud Toronto –
FYBN underwrites their investments based
upon a thorough examination of property economics and a critical understanding
of market dynamics and risk
management strategies. They conduct an in-depth sensitivity analysis on each of
their acquisitions. This analysis applies various economic scenarios that
include changes to rental rates, absorption periods, operating expenses,
interest rates, exit values and holding periods. Cloud Toronto – FYBN uses this analysis to develop their
disciplined acquisition strategies.
Cloud Toronto – FYBN Management Team
Dilip Mooparakath, Chief Executive
Officer of Cloud
Toronto – FYBN
Cloud Toronto is a visionary company founded by Dilip
Mooparakath, a seasoned professional with a rich history in advertising,
branding, and a successful transition into the IT hardware and software
industry. Established in 2012 in Cupertino, California, Cloud Toronto has
consistently demonstrated its commitment to innovation and excellence,
continually expanding its portfolio to include groundbreaking ventures in
commercial real estate and cutting-edge AI technology.
Founder’s Journey:
Dilip Mooparakath embarked on his career in advertising and
branding, spending over a decade in the dynamic landscape of Mumbai, India.
Following this enriching experience, he ventured briefly into the vibrant
market of Toronto, Canada, gaining valuable international exposure.
Diversification into IT Hardware and Software:
In a strategic move, Cloud Toronto transitioned into the field
of Cloud-Based Infrastructure as a Service (IaaS). This venture enabled the
company to provide enterprise-level IT hardware and software solutions to a
global clientele. With a focus on cutting-edge technology, the company has
consistently delivered innovative solutions, catering to the ever-evolving
needs of the IT industry.
Commercial Real Estate Solutions:
In 2017, Cloud Toronto expanded its horizons by delving into the
domain of commercial real estate. Specializing in solutions tailored to the gas
station and convenience store (C-store) businesses, the company has brought
efficiency and innovation to the real estate market.
FYBN App:
An epitome of the company’s innovative spirit, Cloud Toronto
created the FYBN App. This AI-based application has revolutionized the
evaluation of retail business value. It provides invaluable insights and
analytics, making it an indispensable tool for businesses in the competitive
retail sector. The FYBN App has garnered recognition for its ability to provide
real-time data-driven decision support.
Leadership and Education:
Dilip Mooparakath’s exceptional leadership is anchored in a
solid educational foundation. He holds an MBA from Xavier Institute of
Management (XIM) and is a graduate of Mumbai University. These qualifications,
combined with years of hands-on experience, have positioned him as a dynamic
and influential figure in the corporate world.
Market Position:
Today, Cloud Toronto enjoys a dominant presence in the gas
station and convenience store business, competing head-to-head with established
industry giants. The company’s unique blend of IT expertise, commercial real
estate solutions, and AI-powered tools has firmly established its reputation as
an industry leader and innovator.
Mission:
Cloud Toronto is dedicated to creating and implementing
innovative solutions that empower businesses to thrive in an ever-changing
marketplace. We are committed to the principles of excellence, integrity, and
continuous improvement, ensuring that our clients stay ahead in their
respective industries.
Conclusion:
Cloud Toronto, led by the visionary Dilip Mooparakath, is an
embodiment of innovation, adaptability, and a relentless pursuit of excellence.
With a history of success in advertising, IT hardware, software, and commercial
real estate, and the groundbreaking FYBN App, the company continues to shape
the future of businesses and industries across the globe. We invite you to
explore the possibilities with us and experience the transformational power of
Cloud Toronto.
Investment in the Units of the Fund offered
hereby involves risk, including the risk of a complete
loss of the investment and the general economic failure of the Fund.
The following factors should be considered carefully in evaluating an
investment in the Units offered hereby. The risks and uncertainties described
below are not the only ones relevant to the Fund. The investment described
herein involves a substantial risk and represents an illiquid investment. An investor should
be able to bear the loss of the investor’s entire investment. You are urged to read this
Memorandum and the attached exhibits and consult with your own legal, tax, and financial advisors
before investing in the Fund.
In certain applicable circumstances, “Fund” may refer to or include the Fund’s
Affiliates, including any entities formed for the purpose of holding title to
assets of the Fund.
GENERAL RISKS RELATED
TO AN INVESTMENT IN THE FUND
The Fund is considered a “blind
pool.” |
Because the Fund
has not identified all of the specific assets
that the Fund may purchase with investment
proceeds and operating proceeds, this is a “blind pool.” An investor will not
be able to evaluate the economic merit of the Fund’s investments until after
investments have been made.
To be successful, the Fund and its Managing Member (and its
advisors) must, among other things:
·
identify and acquire investments that further the Fund’s investment objectives; ·
rely on the Fund’s
advisors and their
Affiliates to attract, integrate, motivate, and retain qualified personnel to manage
our day-to-day operations; ·
respond to competition for
our targeted investments as well as for potential investors; ·
rely
on Affiliates and third parties to continue to build and expand the Fund’s operations structure
to support its business; and ·
be continuously aware of, and
interpret, market trends
and conditions.
The Fund may not succeed
in achieving these
goals, and a failure to do so could cause the Fund’s investors to
lose a significant portion of the value of their investment in the Fund. |
An investment in the Units has limited liquidity. There is no
public market for the Units and the Fund’s limited redemption program may not have
sufficient liquidity to redeem Units. As a result, an investor should
purchase Units as a long-term investment. |
There is no current market for the Units. The Fund and the
Managing Member do not expect that
a public market
will develop in the near future,
if ever, and the Fund’s Certificate of Formation and LLC Agreement do not
require a liquidity event at a fixed time in the future. Therefore, redemption of Units by the Fund, which must be agreed to by the Managing
Member in its sole and absolute discretion, will likely
be the only
way for an investor to
dispose of its Units. While the redemption program of the Fund was designed
to allow investors to request redemptions of an Investor’s Units,
the Funds ability
to fulfill redemption requests is subject to a number of limitations. Most
significantly, the vast majority of the Fund’s assets consist of properties that
cannot generally be readily liquidated without impacting the Fund’s ability to realize
full value upon their disposition. Consequently, the Fund may not always
have a sufficient |
|
amount of cash to immediately satisfy redemption requests. If
the Managing Member believes that redemption requests place an undue burden
on the Fund’s liquidity, adversely affect its operations or risk having an adverse impact
on the Fund as a whole, or otherwise determines that investing liquid assets
in real properties or other illiquid investments rather than
meeting redemption requests is in the
best interests of the Fund as
a whole, then
the Managing Member
may choose to redeem fewer
Units than are the subject of redemption requests, or none at all. As a result, Members ability to have
Units redeemed may be limited and at times a Member may not be able to
liquidate their investment, any redemption requests by a Member
will require the approval of the Managing Member, which may be withheld in its sole and absolute
discretion. |
Redemption rights of Members
are subject to limitations. |
The Managing Member
may choose to redeem fewer
Units than have
been requested in any particular quarter
to be redeemed by a Member or none at all, in its discretion at any time.
This may be due to a lack of readily available funds because of adverse
market conditions beyond the Managing Member’s control, the need to maintain liquidity for the Fund’s operations or because the Managing Member
has determined that
investing in real property or other illiquid investments is a better
use of the Fund’s capital than redeeming Units. In addition, the aggregate
NAV of total redemptions is limited, in any calendar quarter, to no more than
five (5%) percent. of the
Fund’s aggregate NAV (measured using the average aggregate NAV at the end of
the immediately preceding three months). The Managing Member may make
exceptions to, modify, or suspend redemptions of Units if in its reasonable judgment it deems such
action to be in the Fund’s
best interest and the best interest of our Members. All unsatisfied redemption requests must be resubmitted after
the start of the next quarter, or upon the recommencement of the Unit
redemptions, as applicable. |
The Managing Member has the unilateral ability to redeem a
Member. As a result, an Investor’s Units may be redeemed prior to the Investor achieving
its investment objectives and may be redeemed at a valuation that the
Investors disagrees with. |
The Managing Member
has the sole authority under
Section 6 of the LLC Agreement to redeem the Units of a Member.
Such Units will
be redeemed at the relevant
Net Asset Value per Unit. As a result, an Investor’s Units may be redeemed prior
to the Investor achieving its investment objectives and may be redeemed at a valuation that the Investors disagrees with (Full Liquidation Value). |
Property Valuations and Valuation Methodologies may not always
be timely or reflect the realizable value of an asset. |
For the purposes of calculating monthly NAV, valuations of
properties held within the Fund will occur at least annually. Annual
appraisals may be delayed for a short period in exceptional circumstances. Property valuations will be used to determine the NAV
per Unit of a Class in connection with the issuance and redemption of Member
Units. Because some time may lapse between
the valuation of a property and the issuance or redemption of Member
Units, the applicable property valuation may not
accurately be reflected in the NAV per Unit
as of the day of the acquisition or redemption, as
applicable. Significant events may have occurred that materially changes the
valuation of Fund properties including, without limitation, market
fluctuations, natural disasters, unexpected lease vacancies, or defaults. The
Managing Member may, but is not obligated to, adjust valuations of properties completed to account for the issuance of additional Units (and any capital contributions made in connection |
|
therewith), the redemption of Units (and the use of funds and
proceeds to effectuate such redemptions), the sale, financing, or refinancing
of the Fund’s assets, distribution of capital to Members and the Managing
Member, and the retirement of any debt of the Fund.
The methodology for
conducting valuations of properties held
by the Fund will blend recent valuations and valuation opinions to determine the value
of the individual value of the assets and will include utilizing applicable
financial statements.
The
valuation methodologies used to value the Fund’s properties and certain of
the Fund’s investments will involve subjective judgments and projections and
may not be accurate. Valuation methodologies will also involve assumptions and opinions about future events, which may or may not turn out to be correct.
Valuations and appraisals of the Fund’s properties and other investments will
be only estimates of fair value. Ultimate realization of the value of an
asset depends to a great extent on economic, market and other
conditions beyond the Fund’s control
and the control of the Managing Member. Further, valuations do not
necessarily represent the price at which an asset would sell, since market
prices of assets can only
be determined by negotiation between a willing buyer
and seller. As such, the carrying value of an asset may not reflect
the price at which the asset could be sold in the market, and the difference
between carrying value and the ultimate sales price could be material. In
addition, accurate valuations are more difficult to obtain in times of low transaction volume because
there are fewer
market transactions that
can be considered in the context of the
appraisal. There will be no retroactive adjustment in the valuation of such assets,
the NAV of Units for
issuance or redemptions or NAV-based fees we paid
to the Managing Member to the extent such valuations prove to not accurately
reflect the realizable value the Fund’s assets. Because the price a Member
will pay for Units, and the price at which Units may be redeemed are
generally based on our prior month’s NAV per Unit, a Member may pay more than
realizable value or receive less than realizable value for its investment. |
A Member’s interest in the assets of the Fund will be diluted
as additional Units are issued. |
Holders of Participating Units will not have preemptive rights
to any further Units the Fund issues in the future. The Fund
shall have authority to issue an unlimited number of Units (including fractional Units) and
the Fund may issue
additional Units effective prior to the opening of business
on each Dealing Day unless prohibited
by the Managing Member. To the extent the Fund issues additional Units after
a Member’s purchase in the Offering, such Member’s percentage ownership
interest in the Fund will be diluted. |
Economic events may
adversely affect the Fund’s
cash flow and ability to achieve its investment objectives. |
Economic events affecting the United States economy, including
events occurring outside the United States, such as the general negative
performance of the real estate
sector or the negative performance of the U.S. economy as a whole,
could depress the
valuations of the
Fund’s assets or cause
decreased cash flow. Such events may cause Members to seek redemption of
their Units or prohibit the Fund from raising additional capital through the
sale of additional Units. Moreover, if the
Fund decides to sell certain assets to increase the Fund’s cash flow
or redeem Units,
such events may negatively impact
the Fund’s ability to
achieve its investment objectives. |
COVID-19 could have a material impact on the Fund’s
investments and operations, and
the Fund will continue to monitor the COVID- 19
situation closely. |
Beginning in late 2019, China, as well as several other
countries, experienced an outbreak of a highly contagious form of an upper
respiratory infection caused by COVID-19, a novel coronavirus strain commonly
referred to as coronavirus. On January 30, 2020, the World Health Organization declared this outbreak a “Public Health
Emergency of International
Concern.” On January 31, 2020, U.S. Health and Human Services Secretary Alex M. Azar II declared a public health
emergency for the United
States to aid the U.S. healthcare community in responding to COVID-19. There
are no comparable recent events which may provide guidance as to the effect
of the spread of COVID-19 and a potential pandemic, and, as a result, the ultimate impact
of the COVID-19 outbreak, COVID-19’s variants, or a similar
health epidemic is highly uncertain and subject to change.
The COVID-19 pandemic has resulted in significant and
widespread economic disruptions to, and uncertainty in, the global
and U.S. economy, including in the regions in
which we operate. More specifically, COVID- 19 has led to disruptions in
regional and global trade markets and the logistics necessary to import, export, and deliver
products and materials to companies and their
customers. These disruptions and delays in the supply chain have led to a lack of
availability of certain products and materials and inflation of the price of raw materials in the construction industry. The
foregoing could impair the Fund’s ability to maintain operational standards, disrupt
the operations of the Fund’s
service providers, and lead
to increased development and construction costs.
Cybersecurity and data privacy risks may have also increased
during the COVID-19 pandemic, in part because of the increase in remote working,
social distancing measures and increased reliance on remote connectivity for
many aspects of the economy.
The Fund does not yet
know the full extent of potential
delays or impacts on its projected investments and operations or the global
economy as a whole. However, the effects could have a material impact on the
Fund’s investments and operations, and the Fund will continue to monitor the
COVID-19 situation closely. |
As
of the date of this Memorandum, the United States market (as well as the
larger global markets) are
experiencing inflation in asset
prices that have not been present in the market
since the 1980’s, and such inflation may adversely affect the Fund’s
financial condition and results of operations. |
An
increase in inflation could have an adverse impact on the Fund’s development
costs, labor and service provider costs, floating rate mortgages, credit
facilities, property operating expenses, and general and administrative expenses, as these costs
could increase at a rate higher than our rental and other
revenue. Inflation could
also have an adverse effect
on consumer spending, which
could impact our tenants’ revenues and, in turn, our percentage rents, where
applicable. In addition, leases of long-term duration or which include
renewal options that specify a maximum rate increase may result in
below-market lease rates over time if we do not accurately estimate inflation
or market lease rates. Provisions of leases designed to mitigate the risk of
inflation and unexpected increases in market lease rates, such as periodic
rental increases, may not adequately protect the Fund’s operations from the
impact of inflation or unexpected increases in market lease rates. If the
Fund’s operating, development and other expenses
are increasing faster
than anticipated, the Fund’s business, financial condition, results of operations, cash flows or our ability to satisfy |
our debt service obligations or to pay distributions could be materially adversely affected.
Supply
chain disruptions could create unexpected development, renovation or
maintenance costs or delays and/or
could impact the Fund’s tenants’ businesses, any of
which could have a negative effect on the Fund’s results of operations.
The construction and building
industry, similar to many other industries, has recently experienced worldwide
supply chain disruptions due to a multitude of factors that are beyond the
Fund’s control, including the COVID-19 pandemic, and such disruptions may
continue to occur. Materials, parts and labor have also increased in
cost over the recent past,
sometimes significantly and over a short period
of time. Because
the Fund will be engaged in
large-scale development projects, small-scale construction projects, such as building
renovations and maintenance or and tenant improvements required under leases
are a routine and necessary part of the Fund’s
business, the Fund will most likely incur costs for a property development, renovation or
maintenance that exceeds original estimates due to increased costs for
materials or labor or other costs that are unexpected. The Fund also may be
unable to complete renovation of a property or tenant space on schedule due to
supply chain disruptions or labor shortages. In addition, tenants’ businesses
may also be affected by supply chain issues (particularly for our industrial or
retail properties), which could impact their ability
to meet their obligations to us under their leases.
The Fund may make distributions from sources other than cash flow from operations, which may
negatively impact the valuation of the Fund.
The Fund may make distributions from sources other than cash flow from operations, including borrowings by
the Fund or its Affiliates, proceeds from offerings of the Units, or proceeds
from assets sales, which may reduce the amount
of capital the Fund ultimately may invest and negatively
impact the value of the Fund and a Member’s investment.
The amount and source of distributions the Fund may make
to its Members is uncertain and the Fund may be unable to generate sufficient
cash flows from its operations to make distributions to the Members at any time
in the future.
The Fund has
not established a minimum distribution payment level, and the Fund’s ability to
make distributions to its Members may be adversely affected by a number of factors,
including the risk factors described in this Subscription
Agreement. The Managing Member will make determinations regarding distributions
based upon, among other factors, the Fund’s financial performance, its debt
service obligations, its debt covenants, and capital expenditure requirements.
Among the factors that could impair the Fund’s ability to make distributions to
Members are:
·
the limited
size of the Fund’s portfolio;
·
the Fund’s inability to invest, on a timely basis and in attractive investments, the proceeds from
sales of Units;
·
the Fund’s inability to realize attractive risk-adjusted returns on its
investments;
·
unanticipated
expenses or reduced revenues that reduce cash flow or non-cash earnings;
·
defaults in the Fund’s
investment portfolio or decreases in the value
of
its properties; and
·
the fact that anticipated operating expense levels may not prove
accurate, as actual results may vary from estimates.
As a result, the Fund may not be able to make distributions to the Members at any time in the future, and the
level of any distributions the Fund does make to the Members may not increase
or even be maintained over time.
Purchasers of Units by the Fund’s Affiliates in this Offering
should not influence investment decisions of independent, unaffiliated
investors.
Affiliated persons
of the Fund may purchase
Units. There are no written
or binding commitments with respect to the acquisition of Units by these
parties, and there can be no assurance as to the amount, if any, of Units these
parties may acquire in the Offering. Any Units purchased by Affiliates will be
purchased for investment purposes only. However, the investment decisions made by Affiliates who make such purchases should not influence an investor’s decision
to invest in the Units, and an investor should make its own
independent investment decision.
This is a “best efforts”
offering. If the Fund is
unable to raise a substantial amount of capital in the near term, the Fund may have
difficulties investing in additional properties and/or repaying or refinancing
indebtedness and the investor’s ability to achieve the Fund’s investment
objectives, including diversification of our portfolio type and location, could
be adversely affected.
This offering
is being made on a “best efforts”
basis, which means that the Fund, the sponsor of the Fund,
and the broker-dealers participating in this Offering are only required
to use their best efforts
to sell the Units and have
no firm commitment or obligation to purchase of the Units. As a result, the Fund
may not be able to raise a substantial amount
of additional capital
in the near term.
If the Fund is not able to accomplish this goal, the Fund may have
difficulty in identifying and purchasing further
suitable properties on attractive terms in order to meet the
Fund’s investment objectives. Therefore, there could be a delay between the
time the Fund receives net proceeds from the sale of Units and the time the
Fund invests the new proceeds. For the Members, this could cause a substantial delay in the time
it takes for their investment to realize the full potential returns. This could also adversely affect the Fund’s ability
to pay regular distributions of cash
flow from operations to the Members. If the Fund fails to timely invest
the new proceeds of this Offering, the Fund’s ability
to achieve its investment
objections, including further diversification of the Funds’ portfolio by
property and asset type and location, could be adversely affected. Failure to raise substantial capital
also could hamper the Fund’s
ability to repay or
refinance indebtedness. In addition, subject
to our investment policies, the Fund is not limited in the number or
size of these investments or the percentage of net proceeds that the Fund may
dedicate to a single investment. If the Fund uses all or substantially all of
the future proceeds from this Offering to acquire one or a few investments, the
likelihood of the Fund’s profitability being affected by the performance of any
one of the Fund’s investments will increase, and an investment in the Units
will be subject to greater risk.
If the Fund is unable to raise a sufficient amount of capital
with respect to the Members Units, the Fund
may not be able to construct
a diverse portfolio of investments,
and the value of a Member’s investment in the Fund may fluctuate more widely
with the performance of specific investments.
The Fund is dependent upon the proceeds
to be received from this Offering
to conduct the Fund’s proposed
investment activities. If the Fund is unable to raise a sufficient amount of
capital with respect to the Members Units, the Fund may not be able to
construct a diverse portfolio of investments, and the value of a Member’s
investment in the Fund may fluctuate more widely with the performance of
specific investments. An investor’s investment in Units would be subject to
greater risk to the extent that the Fund lacks a diversified portfolio of
investments. In addition, the Fund’s fixed operating expenses, as a percentage
of gross income, would be higher, and the Fund’s financial condition and
ability to pay distributions could be adversely affected if the Fund is unable to raise substantial funds in this Offering.
The Fund may suffer from delays
if the Fund and its advisors are not able to locate suitable investments, which
could adversely affect its ability to pay distributions and to achieve the
Fund’s investment objectives.
If the Fund is
able to raise capital quickly during this Offering, the Fund may have
difficulty in identifying and purchasing suitable assets in a timely and
efficient fashion. This may impact the value of a Member’s investment in the
Member Units and the Fund’s
ability to pay distribution
to its Members.
The Managing Member
has sole and absolute
discretion of the Fund’s investment policies.
The Managing
Member has sole and absolute discretion of the Fund’s investment and
operational policies, including the Fund’s policies with respect to
investments, acquisitions, growth, operations, indebtedness, capitalization,
and distributions, at any time without the consent of Members, which could
result in the Fund making investments that are differing from, and possibly
riskier than, the types of investment described in this Memorandum. A change to
the Fund’s investment strategy may, among other things, increase the Fund’s
exposure to interest rate risk, default risk, and market fluctuations, all of
which could affect the Fund’s ability to achieve the Fund’s investment
objectives.
The Fund’s participation in a co- ownership arrangement may subject it
to risks that otherwise may not be present in other investments.
The Fund may
enter into co-ownership arrangements with respect to a portion of the assets
the Fund acquires. Co-ownership arrangements involve risks generally not
otherwise present with an investment in other assets, such as the following:
·
the risk that a co-owner may at any time have economic or business
interests or goals that are or become inconsistent with the Fund’s business
interests or goals;
·
the risk that a co-owner may be in a position
to take action
contrary to the Fund’s instructions or requests or contrary to our
policies or objectives;
·
the possibility
that an individual co-owner might become insolvent or bankrupt, or otherwise default
under the applicable loan financing
documents, which may constitute an event of default under all of the
applicable loan financing documents or
allow the bankruptcy court to reject the agreements entered into by the
co-owners owning interests in the relevant property;
·
the possibility that a co-owner
might not have adequate liquid
assets to make cash advances that may be required in order to fund
operations, maintenance, and other expenses
related to the property,
which could result in the loss of current or prospective tenants and may
otherwise adversely affect the operation and maintenance of the property, and
could cause a default under the loan financing documents applicable to the property and may result
in late charges, penalties, and interest, and may lead to the exercise
of foreclosure and other remedies by the lender;
·
the risk that a
co-owner could breach agreements related to the property, which may cause a
default under, and possibly result in personal
liability in connection with, any loan financing documents applicable to the property,
violate applicable securities laws, result in a foreclosure, or otherwise
adversely affect the property and the co-ownership arrangement;
·
the
risk that a default by any co-owner would constitute a default under any loan
financing documents applicable to the property that
could result in
a foreclosure and the loss of all or a substantial portion of the investment
made by the co-owner;
·
the risk that
the Fund could have limited control and rights, with management decisions made
entirely by a third-party; and
·
the possibility
that the Fund will not have the right to sell the property at a time that
otherwise could result in the property being sold for its maximum value.
In the event that the Fund’s
interests become adverse to those of the other co-owners, the Fund may not have the contractual right to purchase
the co- ownership interests
from the other co-owners. Even if the Fund is given the opportunity to purchase
such co-ownership interests in the future, the Fund cannot guarantee that the Fund will have sufficient funds
available at the time to purchase
co-ownership interests from the co-owners.
The Fund may
want to sell its co-ownership interests in a given property at a time when the
other co-owners in such property do not desire to sell their interests. Therefore, because the Fund anticipates that it will be much more difficult to find a willing
buyer for its co-ownership interests in a property than it would
be to find a buyer for a property owned outright, the Fund may not be able to sell its
interest in a property at the time the Fund would like to sell.
The
co-ownerships interests may also be owned by Affiliates of the Fund or the
sponsor of the Fund. There is no guarantee that such Affiliates will make decisions with respect to such real
property or real property assets that are in the best interests of the Fund,
and the Managing Member and the Fund may have no ability to require such
Affiliates to act in the best interests of the Fund. Such adverse decisions may
affect an investment in the Units or the Fund’s ability to make distributions
to the Members.
The Fund is subject to privacy law compliance risks.
The adoption,
interpretation and application of consumer, data protection and/or privacy
laws and regulations (“Privacy Laws“) in the United
States, Europe, and elsewhere are often uncertain and in flux. Compliance with Privacy Laws could
significantly impact current and planned privacy and information security
related practices, the collection, use, sharing, retention and safeguarding of
personal data and current and planned business activities of the Fund Sponsors,
the Fund and the Fund investments, and as such could increase costs and require
the dedication of additional time and resources to compliance for such entities. A failure to comply with such Privacy Laws by any
such entity or their service providers could result in fines, private and
governmental legal action, sanctions, or other penalties, which could
materially and adversely affect the results of operations and overall business,
as well as have a negative impact on reputation and Fund performance. As Privacy Laws are implemented,
interpreted, and applied, compliance costs for the Fund, and/or the Fund
investments are likely to increase, particularly in the context of ensuring
that adequate data protection and data transfer mechanisms are in place.
For
example, California has passed the California Consumer Privacy Act of 2018 and
the California Privacy Rights Act of 2020, and the EU has enacted the General
Data Protection Regulation (EU 2016/679), each of which broadly impacts
businesses that handle various types of personal data. Such laws impose stringent legal and operational obligations on
regulated businesses, as well as the potential for significant penalties.
Other
jurisdictions, including other U.S. states, have passed similar laws, including
the Colorado Privacy Act and the Virginia Consumer Data Protection Act, and
other states have proposed or are considering similar Privacy Laws, which if
enacted could impose similarly significant costs and operational and legal obligations. Such Privacy Laws and regulations are expected to vary from jurisdiction to jurisdiction, thus increasing costs, operational and legal burdens,
and the potential
for significant liability for regulated entities.
The Fund is subject to risks
relating to cybersecurity.
The Fund, the
Fund Sponsors, the Managing Member, any portfolio company or other subsidiary of the Fund and any of their investments and their respective affiliates, service
providers, customers and counterparties use computers, other electronic
devices, networks, software, on-line services and other tools (collectively,
“Information Systems“) to
process, store and transmit large amounts of electronic information, including
without limitation information relating to (i) Fund transactions, (ii) the
members of the Fund, and (iii) the business of the Fund and other Fund
investments, including their customers and counterparties (collectively, “Data“). Data may include confidential information such as market
sensitive data and personally identifiable information of members of the Fund,
customers, and other parties. Information
Systems are not able to protect Data under all circumstances and personnel may also fail to manage and update these Information
Systems sufficiently to protect Data. In
addition, computer malware,
viruses, and computer
hacking, and phishing attacks have become more
prevalent and may occur on the Information Systems at any time and may
successfully compromise the Information Systems’ security processes. Any breach of these or other Information
Systems may cause Data to be lost or improperly accessed, used or disclosed,
may impair performance, reliability and access to the Information Systems,
may impair performance, reliability and access
to the Information Systems,
and cause the Managing Member, the Fund Sponsors, the Fund, its portfolio companies
or other subsidiaries and other Fund investments
and their respective affiliates, service providers, customers and/or
counterparties to suffer, among other things, financial loss, disruption of
business, liability to third parties, regulatory intervention or reputational
damage. Any of the foregoing events
could have a material adverse effect
on the Fund, the Fund Sponsors, the Manger,
the members of the Fund, and the members’ investments therein.
RISKS RELATED
TO THE MANAGING MEMBER AND ITS ADVISORS
AND AFFILIATES
The Fund’s Managing
Member, including its advisors and Affiliates, face conflicts of
interest caused by their compensation arrangements with the Fund, which could
result in actions that are not in the long-term best interests of
the Fund’s investors.
The Fund’s
Managing Member, including its advisors and Affiliates, are entitled to
substantial fees from the Fund under the terms of the LLC Agreement and certain other agreements, including management contracts.
These fees could influence the judgment of the Managing
Member and its Affiliates in performing services for
the Fund.
The Fund’s Managing Member faces a conflict of interest because
the fees it receives for services are based on the Fund’s
NAV, which the Managing Member and its affiliates are responsible for
determining.
The Managing
Member is paid an Asset Management Fee for its
services based on the Fund’s NAV, which is calculated by the Managing
Member and its affiliates. In addition, the calculation of the Managing Member
Performance Allocation is based in part upon the Fund’s
net assets (which is a component of its NAV). The calculation of the Fund’s NAV
includes certain subjective judgments with respect to estimating, for example,
the value of the Fund’s portfolio and accrued expenses, net portfolio income
and liabilities, and therefore, the Fund’s NAV may not correspond to realizable
value upon a sale of those assets. The Managing Member may benefit from the
Fund retaining ownership of assets at times when Members may be better served
by the sale or disposition of our assets in order to avoid a reduction in the
Fund’s NAV. If the Fund’s NAV is calculated in a way that is not reflective of
its actual NAV, then the purchase price of Units or the redemption proceeds of
Units on a given date may not accurately reflect the value of the Fund’s
portfolio, and a Member’s Units may be worth less than the purchase price or
more than the redemption amount. The valuation of the Fund’s investments will
affect the amount and timing of the Asset Management Fee paid to the Managing Member
and its Managing
Member Performance Allocation. As a result, there may be circumstances where the Managing
Member is incentivized to determine valuations that are higher than the actual
fair value of our investments.
Payment of fees to the Managing Member and its advisors and Affiliates
will reduce the cash available for investment
and distribution and will increase the risk that an
investor will not be able to recover the amount of its investment in the Units.
The Managing
Member and its advisors and Affiliates perform
services for the Fund in
connection with the distribution of the Fund’s Units, the selection and
acquisition of the Fund’s investments, and the management of the Fund’s assets.
The Fund pays its advisors and Affiliates fees for these services, which will
reduce the amount of cash available for investments or distributions to the
Fund’s Members. The fees the Fund pays to its Managing Member and its
Affiliates decrease the value of the Fund’s portfolio and increase the risk investors
may not receive a return
on their investment in the Units.
The Managing Member faces conflicts of interest relating to the incentive fee structure under the Fund’s LLC Agreement, which
could result in actions that are not necessarily in the long-term best
interests of the Fund’s investors.
Pursuant to the
terms of the LLC Agreement, the Managing Member is entitled to the Managing
Member Performance Allocation based on the profits of the Fund. The Managing
Member, therefore, could be motivated to recommend riskier investments
in order for the Fund to generate the specified levels of performance that
would entitle the Managing Member to incentive compensation.
The Managing Member and its Affiliates face conflicts of
interest with respect to the allocation of investment opportunities between the
Fund and other investment programs that are managed
by Affiliates of the Managing Member.
The Fund relies
on the Managing Member and its Affiliates and advisors to identify and select
potential investment opportunities on the Fund’s behalf. At the same time, the
Managing Member’s Affiliates and advisor manage other investment programs
sponsored by the sponsor of the Fund that may have investment objectives and
investment strategies that are similar to the Fund’s objectives and strategies. As a result,
such Affiliates and advisors
could face conflicts of interest in allocating acquisition opportunities as
they become available. Each investor will not have the opportunity to evaluate the manner in which these conflicts of interest are resolved before or after making the
investment in Units.
The Managing Member’s advisors
and officers, including its key personnel and officers,
face conflicts of interest related to the positions they hold with
affiliated and unaffiliated entities, which could hinder the Fund’s ability to successfully
implement its business strategy and to generate returns to the Members.
The Managing
Member is managed
by Cloud Toronto – FYBN Cos. The management team of Cloud Toronto – FYBN Cos each
have other business interests as well. As a result, key personnel may have
duties to other entities and their stockholders, members, and Members, in addition to business interests in other
entities. These duties to such other entities and persons may create conflicts
with the duties that they owe indirectly to the Fund. There is a risk that
their loyalties to these other
entities could result in actions or inactions that are adverse to the Fund’s
business and violate their fiduciary duties to the Fund, which could harm the
implementation of the Fund’s investment strategy and its investment and leasing
opportunities.
Conflicts with
the Fund’s business and interests are most likely to arise from involvement in activities related
to (1) allocation of new investments
and
management time and services between the Fund and the other entities,
(2) the Fund’s
purchase of properties from, or sale of properties to, affiliated entities, (3)
the timing and terms of the investment in or sale of an asset, (4) development
of the Fund’s properties by Affiliates, (5) investments with Affiliates of the
Managing Member, and (6) compensation to the Managing Member
and its Affiliates. If the Fund does
not successfully implement its investment strategy, the Fund may be unable to maintain or increase the value of its assets and its operating cash flows and ability to pay
distributions could be adversely affected.
The Fund’s success
depends to a significant degree upon certain key
personnel of the Managing Member. If the Managing Member is unable to obtain
key personnel, the Fund’s ability to achieve its investment objectives could be
delayed or hindered, which could adversely affect the Fund’s ability to pay
distributions to Members.
The Fund’s
success depends to a significant degree upon the contributions
of certain executive officers and other key personnel of the Managing Member, as described in detail in this Memorandum, each of whom would
be difficult to replace. The Fund cannot guarantee that all of these key
personnel, or any particular person, will remain affiliated with the Fund, its sponsor
of the Fund, and/or advisors
and Affiliates. If any of the Fund’s key personnel were to cease their
affiliation with the Managing Member, the Fund’s operating results could
suffer. Further, as of the date of this Memorandum the Fund does not separately
maintain key person life insurance on any person and the Fund may not do so in
the future. The Fund believes that its future success depends, in large part,
upon the Managing Member’s ability to hire and retain highly skilled
managerial, operational, and marketing personnel. Competition for such
personnel is intense, and the Fund cannot assure potential investors that the
Fund’s Sponsor, Managing Member, or advisors will be successful in attracting
and retaining such skilled personnel. If the Managing Member or its Affiliates
lose or are unable to obtain the services of key personnel, the Fund’s ability
to implement its investment strategies could be delayed or hindered, and the
amount available for distribution to the Members may decline.
The Fund’s Sponsors are affiliate entities of the Managing
Member and, therefore, each investor
will not have the benefit of
an independent review of the Memorandum or of the Fund that customarily is
performed.
The Fund’s Sponsors are affiliate entities of the Managing Member and, as a result, are not in a position to make an independent review of the Fund or