Fees and Compensation — Form ADV Part 2A (3/27/2025)
[Brochure]
Item 5: Fees and Compensation
Typically, a project generates two (2) types of fees – a Management Fee and an Incentive
Fee (aka Promote or Performance Fee).
Management Fee The Management Fee is typically calculated as a percentage of
projected revenues or as a percentage of actual project costs. This is paid by the Project
Owner to the Professionals Entity. In some situations, a portion of the management fee is
paid by the Investment Fund to the Professionals Entity. Typically, this fee is paid monthly
and amortized over the life of the project. The Professionals Entity pays some or all of the
Management Fees to Hearthstone. The specific terms, conditions, and payment schedule
of the Management Fee is described in the Investment Fund operating agreement and the
development agreement between the Project Owner and the Builder Partner.
Incentive Fee The Incentive Fee is an additional distribution of profits paid from the
Investment Fund to the Professionals Entity. It is contingent on the Investment Fund
realizing a stated internal rate of return (“IRR”). The specific terms, conditions, and
calculation of an Incentive Fee are described in the operating agreement for each
Investment Fund.
The cash requirements of the Investment Fund are analyzed on a monthly basis to
determine if there is sufficient cash on hand to meet any pending or future capital calls. If
sufficient cash is on hand, a portion of the profits from a project may be distributed to the
individual investors in the Investment Fund.
Account Minimums and Types of Clients — Form ADV Part 2A (3/27/2025)
[Brochure]
Item 7: Types of Clients
Hearthstone investors primarily consist of pension funds, university endowments, Fortune
100 companies, large private trusts and sovereign wealth funds. Minimum investments are
determined within each Investment Fund and are available only to Qualified Clients.