Item 5: Fees and Compensation
Item 5.A.
Generally, as described in their respective offering documents, and as applicable to the specific
Client, the Firm receives fees from Clients based on: (1) a percentage of the aggregate capital
contributions of all investors as described in their respective offering documents (the “Asset
Management Fees”), (2) if applicable, based on the purchase price of each portfolio investment
upon the acquisition of the property (the “Acquisition Fees”), (3) a disposition fee based on the
gross sales price of each portfolio investment sold at the time of each sale (the “Disposition Fees”),
and (4) a percentage of the total costs and expenses actually incurred by the Firm in connection
with the development, construction and renovation of any property (the “Development Fees”), (5)
a percentage of the gross acquisition price of each note acquired in the Client’s portfolio (the
“Structuring Fees”), and (6) fees associated with the liability and costs of Principals of the Firm
making certain personal guarantees as required by certain counterparties (the “Financing Fees”).
The fees and expenses applicable to the Funds and the SPVs are set forth in detail in each of such
Client’s respective offering documents.
The management and performance fee terms and percentages for the Managed Account would be
separately negotiated with the Firm and, thus, fees for the Managed Account would differ from
those of the Funds, which are described below.
Item 5.B.
All Asset Management Fees of the Funds will be payable quarterly in arrears, and may be deducted
from Capital Contributions from the Members or other cash on hand. The Acquisition Fees will
be payable at the time of each acquisition. The Disposition Fee will be payable at the time of each
sale.
As further specified in the respective offering documents, and as applicable to each SPV: Asset
Management Fees of the SPVs will be payable as of the first business day of the relevant quarter.
The Acquisition Fees will be payable at the time of each relevant acquisition. The Disposition Fee
will be payable at the time of each relevant sale of property. The Development Fees will be paid
on the first business day of each quarter and the Structuring Fees will be payable upon the
acquisition of an applicable note.
Item 5.C.
The Funds will bear all of the legal and other organizational and offering expenses incurred in the
formation of the Funds and the offering of the Interests, which, although not currently being
deducted, may be deducted from the initial 5% payment of the subscription amount.
The Funds, except as noted below, will bear all expenses related to its operations, including fees
and other out of pocket expenses directly related to the investigation of investment opportunities
(whether or not consummated), the acquisition, ownership, financing, leasing or sale of its
investments, taxes, fees of auditors and counsel, insurance, litigation expenses, expenses
associated with the preparation and distribution of reports to investors and other appropriate
expenses. Additionally, the Firm’s ability to implement the new, additional, renovated or
converted improvements to an investment property may be conditional upon obtaining certain
governmental or other approvals (including re-zoning approvals). If the Firm were to fail to obtain
such approvals, such failure could negatively impact the Firm’s ability to construct, renovate or
convert the property as planned which could, in turn, affect the anticipated cash flow from the
property. In such a case, the Funds will pay all out-of-pocket expenses.
The Firm will bear all of the ordinary day-to-day expenses incidental to its administration of the
Funds, including general overhead and compensation of its employees, but not including legal fees
and costs, which may be borne by the Funds.
As applicable to the SPVs, the Firm will be entitled to withhold from any distributions amounts
deemed necessary to create appropriate reserves for expenses and liabilities of the SPV, investment
and reinvestment by the SPV and any required tax withholdings. Also if applicable, the SPV will
bear the expenses of development costs which will include, without limitation, all costs incurred
under the construction contract relating to any applicable property, and all architectural,
engineering, legal expenses and other soft costs incurred in connection with a property’s
development, construction and renovation.
Item 5.D.
No Applicable. Fees are not paid in advance.
Item 5.E.
Not Applicable. Neither ESJ, nor its supervised persons, is compensated for the sale of securities
or other investment products or mutual funds. Additionally, ESJ does not charge advisory fees in
addition to commissions or markups.