MFCF

Question 1

What is MFCF?

Answer 1

MFCF was launched in August 2021 and is Origin’s most defensive fund intended for qualified purchasers looking for a LOW risk stream of passive income.
7yr hold, projected returns are 8-10%IRR which translates to 1.6 equity multiple
Monthly Distribution of 7-9% annually based off the interest of these bonds.
This is much higher than your traditional fixed income products.

Question 2

What is the underlying collateral?

Answer 2

The underlying collateral are all 5/7/10yr bonds originated by Freddie Mac (largest US multifamily lender) and are backed by cash flowing diversified multifamily mortgage loans…

Multifamily MBS: Freddie mac issues first lien mortgages and packages about 50-75 loans into a bond and sells them in an auction. The bond is split into A and B Tranche. The A tranche is government guaranteed typically bought by institutional investors. The B tranche is not government guranteed

Question 3

What we found is.. From a credit loss perspective.

Answer 3

These bonds have close to 0 losses only reaching .44% credit loss through the Global FC and this translates to 5% to the B-piece if you were to hold to maturity.

Question 4

Why are losses so low?

Answer 4

This is largely due to the ~30-35% common equity protection you have in the capital structure.

Large institutional sponsors own the actual collateral ex: Blackstone, Bridges of the world.

Question 5

How is it an 8-10% IRR? Delta between 6-8%?

Answer 5

The fixed rate bonds don’t pay current interest, they accrue interest. We buy at steep discount and mature at par value. Basically, Spread between IRR and yield is the result of expected return from fixed rate bonds

Question 6

How big credit loss would we need to wipe out?

Answer 6

38% credit loss on the full bond value would reduce returns by 110%
If current loan pools were to experience similar credit losses to 2006 vintage loans, the B-Piece annual return would be 8.7%, 1.3% less than projected

Question 7

Freddie program?

Answer 7

Freddie has a stringent underwriting process and only let 10-13 operators in the bidding pool. There are high barriers to entry for this program and Origin worked on getting on this list for over a year.

Question 8

Liquidity?

Answer 8

1 option to redeem annually with no penalty; lesser of the FMV and amount of equity originally invested

Question 9

Taxes?

Answer 9

1 Federal K1; You’ll be taxed at ordinary income and you might benefit from the 20% deduction from the REIT subsidiary. You will have to reach out to advisor to determine this.

Question 10

What happens if a mortgage defaults?

Answer 10

Just because 1 loan has a loss, doesn’t mean that there will be a loss at the fund level. If there was a mortgage default, we have the right to buy the loan out of pool. Investors will be given the option to invest on the stand alone property at a discount and risk would be mitigated.

Question 11

Rating?

Answer 11

The Fund has been given an A- rating from Egan Jones, who is a market leader in private placement ratings. The rating uses a 2021 Freddie 10yr B Piece bond

Question 12

MFCF functions like =

Answer 12

High yield fixed income / private credit

Question 13

Leverage?

Answer 13

Adding on to our defensive strategy, low leverage 40% max.

Question 14

For REPO lines..

Answer 14

For REPO Lines – we will sign REPO and get approved for 60% leverage at Barclays BUT we only take 50% proceeds so if underlying collateral changes, we have 10-20% cushion for margin calls.
We have never had a margin call.

Question 15

FEES?

Answer 15

0.85-1.35 management fee depending on committed capital

7% preferred return. Above 7%, Origin will split 50/50 until Origin receives 10%. Returns over 10% get split 90% to investors / 10% to Origin.