Tower RE Fund Presentation 2.28.17

Investor Presentation

2017

Overview – The Fund

What is TREF I

• Investment fund focused on secured first loans on small commercial and non owner occupied properties in the greater Chicago area

• Transitional lender for the Real Estate Investor

• Founded and managed by investment professionals with more than 50 years of combined mortgage and real estate investment experience

Objective

• Provide investors direct access to the lucrative lending market that exists today

• Distribute a high and stable income stream

• Protect investment principle through structure and underwriting

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Overview – The Managers

Richard von der Sitt, Chief Executive Officer of Tower Capital Advisors LLC . • Vice President of NorthPoint Lending Group, Inc. that he founded in 1995. NorthPoint is a Chicago area Mortgage

Broker that has funded over $1 billion in residential and commercial loans. • Previously, Richard founded Mortgage Masters, Inc. in 1990 which became one of the Largest Mortgage Brokers in

the Chicago area with over 60 employees. Annual origination volumes exceeded $200 million. The company was acquired by a Texas mortgage banker in 1994.

• In 1986 Richard acquired a Series 7 Securities License and was a top Financial Planner at Waddell & Reed Financial Services for 5 years. Richard has maintained an Advisor status, managing portfolios for a select base at Foliofn.

Robert von der Sitt, President of Tower Capital Advisors LLC . • President of NorthPoint Lending Group, Inc., since 2007, where he is responsible for all state and national

compliance as well as day to day accounting activities. • Robert is also an Originator, consistently producing $20 million in annual loan originations through his vast

network in Chicago. • Masters Degree in Finance from DePaul University

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TREF I - Investment Opportunity

• Banks have reduced lending due to regulation and balance sheet repair

• The size of the market TREF focuses on is too small for major banks

• Unique borrowing needs and fast closings reduce the number of lenders

• Loan sourcing is local and investors need managers tied to the local market

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Small commercial loans offer a unique and timely

investment opportunity

Experts Agree The following is an excerpt from an interview in Barron's on 5/19/14 with George Roberts co-founder and co-CEO of

the multibillion dollar global investment firm KKR.

Yet if he were starting an investment firm today, Roberts says, he would focus on smaller real-estate deals, not private equity. The big banks don't bother with small deals, and smaller developers are shut out of the market.

"In certain areas there are shortages of capital," he says. "That's why direct lending has become attractive”


• When you deposit money in a bank, the bank lends that money out at a higher rate and keeps the difference

• In TREF, your investment is lent at the higher rate and the majority of the interest is paid back to you

• We allow a 1 year rolling redemption period from initial investment, if you choose to withdraw some of your funds

• Current average rate charged by TREF is 10.867% (2.28/17)

• Current yield distributed to investors is 8.757% (2016 Income Tax Return Yield)

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TREF I investors become the bank

• Generated a 7.8% yield for 2014, 8.6% in 2015 & 8.76% in 2016 • Funded over $29 million with $12 million Paid in Full • Diversified collateral: 194 residential and commercial units • Diversified by borrower: 62 different borrowers • Secured with title: Title insurance on 100% of the loans • Borrowers personal guarantee: 100% of the loans • Secure loan to value: Average Portfolio 55.39% • Lower risk collateral: 100% of the loans are secured by income

producing properties

• 2-28-17

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2014, 2015 & 2016 Performance


• TREF can close a loan in 1 week, most banks are 60-90 days to close

• TREF will close small loans < 300,000 while most banks have a minimum that is much higher

• TREF will lend money on property that needs rehab or repairs

• TREF has flexible guidelines

• TREF puts an emphasis on the property vs. the borrower’s personal credit

• TREF takes a common sense approach and looks at the borrowers other assets

• TREF has the expertise to get the job done while most banks will only make “cookie cutter” loans that fit squarely in the box.

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Transitional borrower will pay higher rates



• The population of Cook County is 5,231,351

• Approximately 60% are between the ages of 25-65

• High School Grad or higher age 25+ is 83.70%

• The # of dwelling units in cook county is 2,175,941

• 53.90% of those units, or 1,172,832, are zoned multi-unit

• Average market value of $400,000, shows $470 Billion of multi-units in Cook County

Data is from the cook county website’s 2014 estimated figures 8 TREF I

Size of Chicago’s Market

• 52% of sales failed due to lack of financing

• Cash comprised 33% of all transactions

• 70% of respondents reported shrinking or unchanged availability of capital

• 85% of sales were valued at or below $2 Million • 26% of most recent sales were between $500-1,000,000

• 22% of most recent sales were between $250-500,000

• 21% of most recent sales were below $250,000

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Survey Results NAR Research Division 2014 Lenders


TREF I 10

Mixed Use Multi Family

Single Family for Rent Store Front/Strip Malls

Types of Property We LIKE


TREF I – Safety of Investment

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We focus on protecting principle and cash flow

Portfolio Composition

• Low individual asset risk with loans of $50,000 - $500,000

• Large number of assets securing loans

• High concentration in lower risk properties

• Avoid riskier asset types such as land

• Loan term typically 6 months to 3 years

Loan Underwriting

• 21 Point Underwrite

• Service loans in house

• Only first lien positions

• Significant collateral

• Require additional collateral when needed

• Title insurance

• Personal guarantees


• Our Loan Closing Documents are produced with Laser Pro, a leader in mortgage and legal documentation. 80% of all the Community Banks use Laser Pro for their loan documents.

• Our Laser Pro license includes $1,000,000 in liability coverage for our mortgage documents.

• We get Title Insurance on every property

• Chain of title and property liens are carefully scrutinized

• Most Reputable Title companies & Expertise are utilized

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First Lien Position – We Get Paid First


• Site inspection of the Property by loan committee prior to funding

• Collateral/property is inspected by an independent appraiser and the market value is determined

• Require property/hazard insurance. Min coverage is replacement cost of improvements as well as rent loss coverage

• Fix & Flips are inspected prior to release of each draw

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We Ensure Collateral Exists


• Notice given to borrower if 30 days past due

• Typical borrower will work out the loan with us

• Our Assignment of Rents allows us to take possession of the property and collect rents directly, even before the foreclosure process is completed

• Default interest rate of 10% Plus Note Rate

• Typical Foreclosure timeframe is 90-120 days. Much faster than “owner occupied”

• Even if borrower files Bankruptcy, that can only slow us down but not stop us

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In Foreclosure we enforce borrower’s promise to repay

Fund Loan Example

TREF I 15

Property Description Type: 14 unit apartment building Appraised Value: $635,000 Loan Amount: $450,000 Loan to Value: 71% Interest Rate Charged: 10.4% Term: 3 Year Balloon

Fund Economics Monthly Gross Interest $3,900 Servicing Costs -0- Currently absorbed by the Manager

Other cost -0- Covered by loan fees . Net Income Available for Distribution $3,900 Managers Share (20%) -$780 Distributed to investors (80%) $3,120 Annualized yield to Investor 8.32%

Tower Capital Advisors LLC

Rick von der Sitt

[email protected]

Office 847-729-1400 Cell 847-612-0900

7434 N. Harlem Ave

Chicago, IL 60631

Rob von der Sitt

[email protected]

Office 773-665-8555 Cell 773-450-1176 7434 N. Harlem Ave

Chicago, IL 60631

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mailto:[email protected]

mailto:[email protected]

Tower RE Fund Presentation 2.28.17

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Transcript of Tower RE Fund Presentation 2.28.17