Types of Clients
Prima provides investment advisory services to a public pension system, insurance
companies, a sovereign wealth fund, a private fund advised by another registered
investment advisor, and a foreign pooled investment vehicle. Prima principals have made,
and may in the future make, an investment through Prima. In addition, Prima advises PMIT,
a privately offered pooled investment vehicle, as well as some securitization trusts, which
issue securities backed by various types of real estate debt investments. Investors in PMIT
include public and corporate pension systems, charitable foundations, and high net worth
individuals.
Methods of Analysis, Investment Strategies and Risk of Loss
Prima uses a fundamental approach to evaluate potential investments, looking at the
financial condition and ownership and other characteristics of specific real property that is
seeking financing, as well as the overall economy and industry conditions. As part of this
fundamental approach, Prima reviews items such as rent rolls, appraisals, leases, expert
reports and market studies that bear on credit risk, as well as information provided by
rating agencies, where relevant. Prima also integrates ESG considerations into our
investment analysis. We adhere to the first of the Principals of Responsible Investment (by
incorporating ESG principles into investment analysis and decision-making processes).
While information provided by third parties purports to be accurate and unbiased, it may
be unreliable and potentially compromise our analysis. Investing in securities and loans
involves a risk of loss that clients should be prepared to bear. In addition, fundamental
analysis does not attempt to anticipate market movements, which can also affect the price
of a loan or security. Clients should understand that market movements could result in a
mark-to-market loss (as compared to an actual credit loss).
Prima typically invests in loans or securities for clients with the intent to hold them in the
client's account for an extended period of time. We employ this strategy when we believe
the investment is fairly valued or undervalued, and/or we want exposure to a particular
market segment over time. A risk in a long-term purchase strategy is that it may not take
advantage of short-term gains that could be profitable to a client. Moreover, a loan or
security could decline in value while it is being held long-term. Prima sometimes buys
securities for clients with the idea of selling them within a relatively short time (typically a
year or less).
Investing in real estate debt poses numerous risks, which are explained below:
Risks Arising from Real Estate Collateralizing Loans. Client investments are
subject to risks associated with the real estate industry in general. These risks
include, among others: (i) possible declines in the value of real estate; (ii) risks
related to general and local economic conditions; (iii) possible lack of availability
of mortgage funds; (iv) overbuilding; (v) extended vacancies of properties; (vi)
increases in competition, property taxes and operating expenses; (vii) changes in
zoning laws; (viii) costs resulting from the clean-up of, and liability to third
parties for damages resulting from, environmental problems; (ix) casualty or
condemnation losses; (x) inadequate insurance coverage, or the failure of an
insurer to pay a claim or the insolvency of an insurer; (xi) risks from floods,
hurricanes, earthquakes or other natural disasters, including uninsured damages
and re-designation of previously designated “non- flood” areas; (xii) risks from
the economic impact of a pandemic; (xiii) risks of terrorist attacks; (xiv)
limitations on and variations in rents; and (xv) changes in interest rates and the
performance of the stock market. Such risks are higher to the extent that assets
underlying or collateralizing clients’ investments are concentrated
geographically, by property type or in other respects. In addition, real estate
loans are subject to prepayment by borrowers, which can materially and
adversely affect the expected returns from an investment, even when there are
prepayment premiums and defeasance provisions.
Risks of Investing in Real Estate Debt. Repayment of a real estate loan depends
on the performance and value of the related mortgaged property. Loans secured
by commercial or multi-family properties may have a greater likelihood of
delinquency and foreclosure, and a greater likelihood of loss in the event of
delinquency or foreclosure, than loans secured by an owner-occupied single-
family property. Commercial lending typically involves larger loans to single
borrowers or groups of related borrowers than single-family loans. There may
be a general increase in vacancy rates and a decline in values with respect to
commercial or multi-family real estate across the United States. When combined
with the contraction of credit liquidity, these factors may result in increased
defaults and greater losses with respect to commercial real estate loans.
Commercial and multi-family real estate can be affected significantly by the
supply and demand in the market for the type of property securing a loan and,
therefore, may be subject to adverse economic conditions. Market values may
vary as a result of economic events, a pandemic or governmental regulations
outside the control of borrowers or lenders that impact the cash flow of the
property. The risks of investing in commercial or multi-family real estate loans
include adverse changes in general, national or local economic conditions, real
estate values generally and in the locale of mortgaged properties, interest rates,
real estate tax rates, other operating expenses (including costs of energy),
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