Income PLUS Fund Flashcards
Moving down the line in the risk spectrum we have our Income Plus Fund which looks and feels like a private RE….Short Summary?
Launched in early 2019, Income Plus is a combination of everything we do at Origin.. It’s ideal for investors looking for both income and growth. The fund generates a STABLE 9-11% total return with minimal volatility and a 5-7% of annual distribution
Current performance?
Despite a volatile year for the public markets, the IncomePlus Fund has generated an 14.1% trailing 12-month total return (7.3% YTD) AND that’s bc its been structured to withstand all market environments. Today we are very defensively positioned.
Talk about strategy…
Multi strategy fund that uses both debt and equity.
○ On the DEBT side, we issue debt through preferred equity positions.
We like this position bc it has a ton of cushion. You are in between the Senior lender and common equity, which gives you a 15-20% cushion to loss. It’s a more conservative position AND still getting paid 13-14% which is well outpacing inflation even if it stays at 8%…
On the equity side, we have value add core plus and ground up development
○ We provide LP capital and sometimes Co-GP;
○ Just to clarify - we are NOT flipping development deals - we are holding them.
○ We like 5.5-6 ROC vs 3.5 cap you find when buying core assets
○ We only own 3 cash flowing assets here. We haven’t acquired any assets for 2 years, the market has been overpriced. (This may change in the next 12mo)
○ The Core plus assets provide monthly cash flow distributions and a depreciation shield.
○ What is Core Plus? Stabilized cash flowing assets with upside potential; Class A multifamily in affordable markets with strong job growth and population growth. Renter by choice.
Most Tax efficient Vehicle
This is our most tax efficient vehicle. Structured as REIT subsidiary so depreciation is taxed through the REIT making it non-taxable …
○ We have a subsidiary REIT in which investors can take 20% deductions on their dividends
○ Return of Capital tax shelter minimizes the taxable portion of monthly distributions
○ In 2021, 94% yield was tax free and we expect the same going forward.
DRIP
We also offer a Distribution Reinvestment Program “DRIP” for this fund. Taxes are not deferred and they will still show up on K1 but your dividends are reinvested and helps maximize your return. About 60% opt to reinvest distributions and get compounding benefits. We need to know the basis every single month.
Performance during COVID?
The fund performed just how it was supposed to and it never missed a month of distribution since inception. Fund is structured to give a constant stream of income bc of the pref and allows us to be consistent.
○ We had a robust pipeline before COVID and just waited a few months. We don’t just deploy money we are methodical and thoughtful.
Assets/ Cities? Why these markets?
We have 25 investments closed in this fund. (Houston, San Antonio, Austin, SC, NC, Nashville, Jacksonville, Tampa, St Augustine - all cities that have imbalances in housing supply and a lot more people are being forced to rent, “trapped renters”
FEES?
(Pg 16 of the presentation) 1x admin fee (anything above 250k there is a 50% reduction) , 0.5% acquisition fee (portion to land gets charged immediately, construction portion amortized for 24mo), 1.25% asset management fee based of NAV
Walk me through the math here:
100,000
Upfront 0-2% based on the size
100k = 2% , 1x set up fee
Debited out of client capital account
NAV Day 1 = 98,000
Clients or IRA doesn’t pay that. Fees are taken at the fund level
Acquistion only when we acquire an asset = common equity or development fee
In Preferred equity, we receive 100-200 bps, 50% goes to fund investors
Annual asset management 1.25% of NAV
Performance fee = 10% after investors earned 6%
Resets annually and subject to high water mark
Buy $10 share price
Share price goes to $11
Origin .10 on the dollar
Year 2 = $11
6% based off $11 not 10
Capital Call?
Functions more like a traditional REIT where Capital is called at ONCE. Single call for full commitment. There typically is a queue but right now we are in a position to take it immediately.
Liquidity?
1 year lock out, 5yr min hold. Quarterly tender offerings.
