Item 5: Fees and Compensation
Item 5.A: Description of Compensation Arrangements
Brightstone will be compensated for its services based on a variety of factors, including the
investment strategy, the size of the overall portfolio and the nature and structure of Brightstone’s
relationship with the Investment Vehicle (e.g., joint venture, wholly owned portfolio, platform
vehicle or separate account). Brightstone’s compensation generally includes asset management
fees and may also include advisory fees, financing and/or syndication fees and incentive fees.
Brightstone may also receive acquisition and disposition fees under certain Investment Vehicle
agreements. In most circumstances Brightstone will set the fees that it will charge when it forms
an Investment Vehicle, prior to offering interests in the Investment Vehicle to third party
investors, based on its view of the market for such fees and services.
Asset management fees will typically be calculated as a percentage of the capital invested by
each investor in the Investment Vehicle and will typically be payable quarterly. Asset
management fees may be invoiced directly to investors, deducted from investor capital
contributions or paid from the Investment Vehicle’s cash on hand.
Advisory fees, financing and/or syndication fees, acquisition fees and disposition fees, if
applicable, will typically be calculated as a percentage of the specific transaction value and
payable at the closing of such transaction. To the extent the activities of any employee of the
Firm or any business activities of the Firm regarding a syndication would require licensing or
registration, the Firm will undertake to obtain and maintain the appropriate licensing or
registrations to perform those functions or business activities.
Brightstone or its affiliates may also receive incentive fees as a component of the overall
compensation that Brightstone would receive for its services. These fees will typically be based
on agreements with the Investment Vehicles and calculated as a specified portion of the return
that exceeds a realized return threshold identified in the Investment Vehicle’s formation and
offering documents. Any incentive fees charged will be structured to comply with Rule 205-3
under the Investment Advisers Act of 1940, as amended (“Advisers Act”).
Conflicts Related to Valuation and Fees
Under certain circumstances, Brightstone’s management and incentive fees may be based on the
value of assets under management. Because the Investment Vehicles will typically hold assets
that are illiquid or hard to value, this creates a conflict of interest between the Investment
Vehicle and Brightstone. Please refer to Item 6 for additional information regarding such
conflicts of interest. In these cases, Brightstone expects that it will value the Investment
Vehicle’s assets based on independent appraisals in accordance with valuation guidelines
disclosed in the Investment Vehicle’s formation and offering documents. Brightstone has
adopted valuation policies and procedures that will help to mitigate these conflicts and enable the
assets or portfolios to be valued fairly and in the investor’s best interests.
In most circumstances Brightstone will set the fees that it will charge when it forms an
Investment Vehicle, prior to offering interests in the Investment Vehicle to third party investors,
based on its view of the market for such fees and services. As a result Brightstone’s fees may not
reflect negotiation with a third party, which represents a conflict of interest between Brightstone
and the Investment Vehicle.
Item 5.B: Manner of Fee Payment
The manner in which Brightstone is paid for its services will vary by Investment Vehicle and
type of service provided and will be documented in the advisory agreement with each Investment
Vehicle and disclosed in the offering documents for each Investment Vehicle. Brightstone
expects to bill in arrears for asset management fees. Fees may be invoiced directly to investors,
deducted from investor capital contributions or paid from the Investment Vehicle’s cash on hand.
Fees will be payable periodically depending on the nature of the fee. For example, asset
management fees will generally be payable on a quarterly basis; transaction fees (such as
advisory fees, financing and/or syndication fees, acquisition fees and disposition fees) will
generally be payable within a certain period of time following the closing of a transaction; and
incentive fees will be payable on a periodic basis, quarterly or annually, or upon the realization
of a capital event such as the sale of assets, typically after an investors’ specified return threshold
has been reached.
Item 5.C: Other Fees Clients May be Charged
The Investment Vehicles, except as noted below, will typically bear all expenses related to the
formation of the Investment Vehicle, the acquisition and disposition of the Investment Vehicle’s
investments and the management, ownership, leasing, development or redevelopment of the
Investment Vehicle’s investment portfolio, including fees payable to service providers other than
Brightstone in addition to those paid to Brightstone as described in Item 5.B above. Each
Investment Vehicle’s formation and offering documents will describe the fees and expenses
payable by the Investment Vehicle.
The Firm will typically be entitled to withhold from amounts otherwise distributable by an
Investment Vehicle reserves for the proper operation of the Investment Vehicle, including for the
current or anticipated expenses and liabilities of the Investment Vehicle (including fees or other
amounts payable to Brightstone), and amounts in respect of any required tax withholding.
Investment vehicle expenses generally
Expenses borne by Investment Vehicles (and therefore, its investors) will typically include fees
and out of pocket expenses directly related to the due diligence investigation of its investments
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