Item 5 – Fees and Compensation
The Fund pays an annual management fee (the “Management Fee”) to LHCM. The
Management Fee is payable quarterly in arrears and is equal to 1.5% per annum of the aggregate
amount of net invested commitments that remain invested. This fee is deducted directly from the
Fund bank account and is not negotiable.
The following chart summarizes the form of compensation to be received by LHCM:
Management Fees 1.5% of net invested commitments
Carried Interest 15% above an 8% hurdle
Reimbursement of Expenses 100%
The following chart summarizes those fees to be received by LendingHome when it originates
Residential Bridge Loans purchased by the Fund. 100% of the fees are collected and earned by
LendingHome either prior to the Fund’s purchase of the Loan or over the life of the Loan.
Therefore, these fees are not included in the Fund’s gross income.
Origination Fees Typically, 1.0 – 2.0% of total loan amount
Processing Fees Ranges from $200-$1,000, covers third-party
costs to originate.
Servicing Fees Market Rate, typically 0.5% - 1.50% of
unpaid principal balance
Late Penalty Fees Typically, $35-100, covers processing costs
related to manual entries and bank redrafting
fees.
Holdback Administration Fees Typically, $95-$125, retained by Servicer to
cover cost of inspection and rehab holdback
disbursement to the borrower.
Carried Interest
The Fund pays a performance fee in the form of a carried interest. The carried interest is
derived based on the Fund’s net investment income and a promote hurdle. The amount is
calculated when fund distributions occur, which occur no less than quarterly. LHCM receives
the carried interest concurrently with the fund distributions. In the event the lifetime cumulative
return is below the hurdle rate, LHCM will reimburse the Fund’s General Partner.
Miscellaneous Revenues:
Fees ordinarily payable to the owner of an investment, such as break-up fees, are paid to the
General Partner (or its affiliates) and not to the Fund. Any such amounts are for the benefit of
the Fund and will be applied by the General Partner to offset the Management Fee payable by
the Fund, with any balance distributed in accordance with the distribution procedures outlined in
the Fund’s PPM.
Organizational and Offering Expenses:
The Fund bears all the legal, travel, accounting, other professional, printing, filing, formation
and other organizational expenses incurred in forming the Fund and offering the limited
partnership interests therein and related entities (such as the General Partner and the Feeder) and
obtaining commitments from the Partners (“Organizational Expenses”). The Management Fee is
reduced by (a) all amounts paid by the Fund to any placement agent or financial advisor relating
to the formation of the Fund and (b) Organizational Expenses paid by the Fund in excess of $1.5
million.
Operating Expenses:
The Fund pays all costs and expenses relating to its operations, including, but not limited to:
(a) legal, auditing, consulting, technological, third-party administration and accounting fees and
expenses (including costs of reports to the Partners, financial statements, tax returns, K-1s, data
services, and financial modeling software and services); (b) expenses of any meetings of the
Advisory Committee and of Limited Partners; (c) all expenses associated with the consideration,
acquisition, servicing, holding and disposition of its proposed or actual investments, including,
without limitation, any and all costs associated with Alternative Investment Vehicles and any
holding vehicles, insurance, indemnification, travel, entertainment, custodian and other
unreimbursed expenses, brokerage fees and commissions and administrative fees related to
underwriting and processing individual transactions; (d) all extraordinary expenses (such as
litigation), officer liability and similar insurance and indemnification expenses; (e)
administrative costs and expenses relating to the operation of the Fund, including, without
limitation, filing fees and legal or regulatory compliance expenses; (f) interest on and fees and
expenses arising out of all permitted borrowings made by the Fund, including financings and
refinancings of the Fund's investments; (g) all third party expenses relating to unconsummated
transactions; (h) all expenses of liquidating the Fund; (i) any taxes, fees or other governmental
charges levied against the Fund and all expenses incurred in connection with any tax audit,
investigation, settlement or review of the Fund; and (j) all expenses associated with due diligence
of its proposed or actual investments, including travel and expenses for site visits. LHCM is
responsible for its own operations, including rent, salary, furniture and fixtures and office
equipment.
Conflicts of Interest
The Fund is subject to various conflicts of interest arising out of its relationship with
LendingHome and LHCM. None of the agreements and arrangements between LendingHome,
the Fund, and LHCM, including those relating to compensation, resulted from arm’s-length
negotiations. These conflicts of interest include, but are not limited to, the following:
• Receipt of Management Fees: LendingHome is an affiliate of LHCM and will be paid the
Management Fee. Such Management Fee is intended to compensate LendingHome for
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