Item 5. Fees and Compensation
Clients may pay the Adviser some or all of the following fees. In addition, investors must review all of
the governing documents for the particular Client Account in which they are invested, including, but not
limited to, the limited partnership agreement, advisory or operating agreement. These governing
documents will disclose the specific expenses related to their investment with the Adviser.
Clients generally pay a management fee (the “Management Fee”) of between 0.50% and 1.5% per
annum. This Management Fee may be calculated on: a) the Client’s net assets, b) the amount of capital
of the Client drawn for investment by the Adviser, c) a fixed fee, or d) the amount of equity and debt of
the Client. The Management Fee may be paid monthly or quarterly either in advance or in arrears and
may be paid to the Adviser on an accrued basis. The Management Fee for any partial quarter shall be
pro-rated. The Adviser may charge different Management Fees to certain investors, family members or
employees at its sole discretion.
In addition, Clients are generally subject to one of the following two performance fees (the “Performance
Fees”):
1. At the end of each year, 20% of the profits allocated to a Client for such calendar year may be
reallocated to the Adviser; provided, however, that such reallocation shall only be made to the
extent that aggregate profits allocable to a Client for such calendar year exceed any previous
unrecovered losses that the Client has been subject to in prior calendar years.
2. At the end of each year, any net profits allocated to a Client for such year may be allocated
between such Client and the Adviser (or one of its affiliates) at the end of such year as follows:
First, so long as the Client has a cumulative loss built up from prior years, such profit shall be
allocated to such Client up to the amount of such cumulative loss; and then
Second, (A) 10-20% of any such profit shall be allocated to the Adviser subject to a target
return figure; and (B) the balance of any such profit shall be allocated to the Client.
The Adviser may charge different Performance Fees to certain investors, family members or employees
at its sole discretion.
The Adviser, on behalf of certain Clients, may engage third parties or related parties (including the
Adviser or affiliates of the Adviser) to provide the services of trustees, servicers, originators, property
managers, real estate development and/or construction, paying agents, asset monitoring or servicing, non-
discretionary investment advice or other services as necessary at third party market rates, the costs of
which will be borne by the Client. In addition, the Adviser or affiliates may receive syndication fees
from other lenders in connection with the syndication of certain loans originated by the Adviser (all such
fees described in this paragraph are collectively referred to as (“Ancillary Fees”). The receipt of such
fees by the Adviser or its affiliates may not reduce the Management Fees and Performance Fees made to
the Adviser. Further, Clients of the Adviser may pay finder’s fees in connection with certain
investments.
The Adviser generally deducts fees from Client Accounts and bills the Advisory Account directly for
fees incurred on a basis no more frequently than monthly.
Clients may pay some or all the following expenses in connection with the Adviser’s services: (i) any
Management Fees paid to the Adviser; (ii) fees, costs and out-of-pocket expenses incurred by the Client
in connection with the formation of the Client and the offering and distribution of the interests in the
Client , including, without limitation, legal and accounting fees, printing costs, travel expenses and
government and regulatory filing fees and expenses; (iii) legal, administration, accounting, audit and tax
preparation, and other external professional fees and expenses other than organizational expenses; (iv)
all out-of-pocket costs and fees of evaluating potential investments to be made by the Client
(whether or not consummated) and of trading, acquiring, holding, monitoring or selling securities for the
Client ; including, without limitation, travel, correspondence and expenses of registering or qualifying
securities held by the Client for sale and brokerage commission and other transaction costs and
expenses; (v) out-of-pocket costs of reporting to regulatory authorities (if required) and to the Clients,
and of preparing and providing annual audited financial statements and Schedule K-1’s and filing annual
tax returns and related statements for the Client and holding meetings with the Clients and other
meetings; (vi) third party out-of-pocket costs such as expenses of prime brokers, custodians, sub-
custodians, paying agents, transfer agents and registrars, counsel, independent accountants, and others,
costs incurred in connection with the preparation of or relating to reports made to clients, and similar
recurring expenses incurred in the ordinary course of Client operations; (vii) all costs related to litigation
involving a Client , directly or indirectly, including, without limitation, attorneys' fees incurred in
connection therewith; (viii) all costs related to the Client’s indemnification or contribution obligations;
(ix) the costs of any litigation, director and officer liability or other insurance and indemnification
or extraordinary expense or liability relating to the affairs of the Client ; (x) all expenses of liquidating
the Client ; and (xi) any taxes, fees or other governmental charges levied against the Client and all
expenses incurred in connection with any tax audit, investigation, settlement or review of the Client .
Clients are encouraged to review the particular governing documents for the Client in which they are
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