Types of Clients
As indicated above, Avanti’s current clients include the Private Investment Funds. Investors typically
invest directly or indirectly through variable life insurance contracts and group variable annuity contracts
offered by one or more insurance companies that are investors in a Private Investment Fund. Such investors
are generally accredited investors, which may include endowments, foundations, high net worth
individuals, pension and profit-sharing plans, institutional investors, funds of funds, and hedge funds. The
minimum investment commitment required of an investor in a Private Investment Fund is generally
$1,000,000, although Avanti retains the discretion to waive these minimums.
Methods of Analysis, Investment Strategies and Risk of Loss
Method of Analysis and Investment Strategies.
The Private Investment Funds generally invest in residential and commercial land in major metropolitan
areas in the southern and western United States, including, without limitation, unimproved land, land with
developed infrastructure, land with existing buildings intended to be demolished for redevelopment
(“Properties”), and debt instruments secured primarily by a collateral interest in land (“Mortgages”, and
together with Properties, “Real Estate Assets”).
Avanti generally seeks to identify and invest in residential and commercial land parcels that are strategically
located in growth corridors of cities with good long-term growth characteristics. Avanti evaluates potential
investment opportunities for clients using Avanti’s own proprietary research criteria, such as extensive
market research combined with engineering and legal due diligence reviews. The specific objectives and
strategies for each Private Investment Fund are described in the Private Investment Fund’s offering
memorandum.
When Avanti directs investment in a Mortgage or similar debt investment, Avanti negotiates the terms of
the investment in the best interests of its client, including, but not limited to, negotiating the interest rate
terms, repayment requirements, and other terms of the debt instrument.
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Risk of Loss.
While Avanti actively manages its portfolios in an effort to achieve returns and reduce risk of loss, all
investment portfolios are subject to risks. Accordingly, there can be no assurance that client investment
portfolios will be able to fully meet their investment objectives and goals, or that investments will not lose
money.
Below is a description of several of the principal risks that client investment portfolios face.
Risks of Investing in Real Estate Assets. Where Avanti invests client assets in Real Estate Assets,
such investments are subject to all the risks inherent in investing in Real Estate Assets. These risks
include, without limitation: illiquidity of real estate investments; general and local economic and
social conditions; neighborhood values and the adverse use of adjacent or neighboring real estate;
the supply of, and demand for, properties of the type in which a client invests; changes in tax,
zoning, building, environmental and other applicable laws; real property tax rates; changes in
interest rates; governmental actions; fluctuation of real estate values; the unavailability or limited
availability of credit that may render the sale of Real Estate Assets difficult or unattractive;
calamities; and, acts of bad faith. Such risks also may cause fluctuations in operating expenses,
which could adversely affect the value of client investments in Real Estate Assets. Where client
investments include debt instruments, such investments are also subject to the risk of counterparty
default.
Softness in Economies and Real Estate Markets; Distressed Properties. One result of the recent
economic downturn was substantial decline in real estate prices and sales volumes generally. The
success of the client investments in Real Estate Assets will depend, at least in part, on the extent
that economic recovery, or the perception of economic recovery, results in increased prices and
interest in each client’s investment portfolio. If the economies of areas that a client invests remain
weak, suffer further declines, or otherwise fail to sufficiently improve, these areas will likely fail
to see an increase in real estate prices or sales volume and a client’s investments may lose money.
Environmental Matters. Under various federal, state, and local laws, ordinances, and regulations,
an owner and operator of real property may be liable for the costs of removal or remediation of
certain hazardous substances released or located on its property. Such laws often impose liability
without regard to whether the owner or operator knew of, or was responsible for, the release or
presence of such hazardous substances. The presence of such substances, or the failure to properly
remediate such substances, when released, may adversely affect the owner’s ability to sell such real
estate or to borrow using such real estate as collateral. In addition to clean-up actions brought by
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federal, state, and local agencies, the presence of hazardous waste on Properties could result in
personal injury or similar claims by private plaintiffs. Hazardous substance contamination in Real
Estate Assets in which a client invests could adversely affect the value of such investments.
Non-Specified Investments. Avanti invests client assets in Real Estate Assets that will not be
identified to clients prior to such investment. Clients must rely on the judgment and ability of
Avanti with respect to the investment of client assets and will not have an opportunity to evaluate
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