The Company’s investment objectives are to generate current income for its investors and achieve social betterment by providing viable solutions for borrowers at risk of foreclosure to stay in their homes as well as facilitate dispositions that return vacant abandoned homes to service.
The Resolution Fund I was created and is managed by Resolution Capital Management, LLC with the purpose of raising capital through the sale of Equity Membership Units, or shares. The primary of objective of The Fund is to generate steady cash returns through investments in distressed residential mortgage debt, with capital appreciation serving as a secondary objective. The capital raised from the sale of equity membership and secured notes will be used to acquire performing, sub-performing and non-performing real estate mortgages.
The executive management team of Resolution Capital Management first identified the unique opportunity at the start of the recession in 2007. The recession resulted in a massive level of loan defaults on residential and multifamily properties that had not been seen since the Great Depression. Banks are flooded with “seriously delinquent” mortgage notes that needed to be liquidated. According to the Federal Reserve Bank of New York*, as of Q2/2015 more than $210 Billion of residential mortgage loans are “seriously delinquent” at more than 90-days late, which our financial institutions will liquidate through resale to the secondary market. This equates to an estimated 9 million delinquent assets on the books of the U.S. financial institutions which will be liquidated. The Manager believes that there is a 3-5 year opportunity to acquire these distressed assets at a steep discount. A large capital reserve is necessary to acquire the incredible deals and thus the Resolution Fund I was born.
The investment strategy is simple; we acquire undervalued assets at prices substantially lower than their current and re-positioned market values. The Fund invests in two types of undervalued assets: individual and pools of performing, sub-performing, and non-performing mortgage loans, secured by real estate. The Manager intends to deploy a mixture of both non-performing and performing notes in its asset portfolio. The intention is to balance the fund portfolio composition with 40% performing notes and 60% non-performing notes, so that the performing notes provide immediate cashflow while working with borrowers to modify their non-performing notes. The return on investment for reperforming notes will have a minimal threshold of 15% annualized cash-on-cash ROI, and more typically an average of 25% or higher.
When a loan, or pool of loans, are purchased the goal is to modify each loan with terms that fall within the parameters of success. This includes negotiation with the borrower to bring the loan current, refinance, and realize the cashflow. If the loan modification is unsuccessful the property will go to foreclosure and liquidated for cash, typically at a profit of 50% or more. See The Opportunity With Distressed Notes for more information.
The design is to keep expenses at a minimum. Other than accounting, audit, tax return preparation, fees and operating expenses, that Manager will bear all other overhead expenses such as rent and personnel costs.
The Fund was designed to defer any share of the profits to the Manger unless and until the Preferred Returns are achieved. This structure is intended to motivate the manager to focus on the bottom line. Subject to performance of the Fund and after paying Fund Expenses, equity Members are allocated a preferred return of 8% paid quarterly. Members will also divide with the Manager, on an annual basis, net profits to Members ranging from 50% to 70%. Please see our Term Sheet for details.
This offering is made to a limited number of accredited investors to purchase Membership Units of the LLC. The minimum subscription from each investor is $50,000.00. However, the Manager reserves the right, in its sole discretion, to accept subscriptions in a lesser amount. The offering will continue until a Maximum offering amount is raised or the offering is withdrawn by the LLC.
Resolution Capital Management, LLC is accountable to Resolution Fund I, LLC as a fiduciary, which means that the Manager is required to exercise good faith and integrity with respect to LLC affairs and sound business judgment. A term sheet, or summary of the Fund structure and management is available to all investors and potential investors. To obtain a copy, a request can be made to our Investor Relations department by completing our contact form.
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