ITEM 5: FEES AND COMPENSATION
Item 5.A. Description of Compensation Arrangements
As outlined in each Fund’s Governing Documents, Otay Village Manager will receive а processing
fee (the “Processing Fee”) with respect to each Investor upon investment, to pay for or reimburse
organizational expenses and marketing costs, commissions and fees to placement agents in
connection with each Fund’s offering and Investors’ participation in such offering. Otay Village
III Manager is entitled to a Processing Fee of 10% of an Otay Village III Fund Investor’s capital
contribution amount (initially $50,000) and Otay Village 8 Manager is entitled to a Processing Fee
of $65,000 from an Otay Village 8 Fund Investor.
Otay Village Manager will also receive an annual fee for Fund administration and immigration
workflow services equal to the relevant Fund’s out-of-pocket, per-Investor cost (the “Funds
Administration Cost”). The Funds Administration Cost will reduce each Investor’s preferred
return, as described in each Fund’s Governing Documents (the “Preferred Return”). The Funds
Administration Cost will be payable only from a portion of the Preferred Return that would
otherwise be paid to an Investor. If the aggregate Preferred Returns distributable to an Investor are
insufficient to satisfy the Funds Administration Cost for an Investor, such Investor will not be
responsible for any shortfall in the Funds Administration Cost.
The Processing Fee and Funds Administration Cost are generally not negotiable; however, Otay
Village Manager, in its sole discretion, may modify, waive, or rebate the Processing Fee or Funds
Administration Cost for certain Investors as set forth in each Fund’s Governing Documents. Any
such reduction or rebate of the Processing Fee or Funds Administration Cost will not affect the
Processing Fee or Funds Administration Cost charged to other Investors.
In addition, the Funds solely provide financing to Otay Village Manager’s affiliates to finance real
estate development projects managed by such entities. As such, certain of Otay Village Manager’s
affiliates may benefit as a result of such financing.
Item 5.B. Manner of Payment
As noted above, each Investor is required to pay a Processing Fee in addition to its investment
amount upon subscription. The Funds Administration Cost will be funded as a reduction of each
Investor’s Preferred Return on an annual basis in arrears.
Item 5.C. Other Fees and Expenses Clients May be Charged
The Funds are responsible for their normal, recurring daily operating expenses, including legal
fees, indemnification obligations and litigation costs. Otay Village Manager may advance Fund
expenses, with such advances reimbursed by the Funds from future net distributable cash from
operations or net distributable cash from certain capital events. There is no limit on the amount of
expenses that may be reimbursed.
In addition to the interest payments set forth under the loan agreement outlined in each Fund’s
Governing Documents, in the case of Otay Village 8 Fund, the Project Owner (as defined below)
will reimburse Otay Village 8 Fund for all such expenses once the Processing Fees are depleted.
Such reimbursements will be made pursuant to the reimbursement agreement outlined in Otay
Village 8 Fund’s Governing Documents (the “Reimbursement Agreement”). No portion of an
Investor’s capital contribution will be applied to Fund expenses.
Any new fund launched by Otay Village Manager may have materially different terms than those
summarized above. Investors should review each Fund’s Governing Documents for details of each
Fund’s fee structure and expenses.
Item 5.D. Timing of Fee Payments
As noted in Item 5.A above, Investors are required to pay a Processing Fee in addition to their
capital contribution upon investment. Otay Village Manager may be obligated to return Investors’
Processing Fees and capital contributions upon certain events, which are outlined in each Fund’s
Governing Documents.
Item 5.E. Receipt of Compensation for Sales
Neither Otay Village Manager nor or its supervised persons are compensated for the sale of
securities or other investment products.