General Description of Advisory Firm
American Mortgage Investment Partners Management, LLC (the “Adviser”) is a Delaware limited
liability company formed on May 5, 2016. The Adviser's principal owners are Seaside Mortgage
Investments, LP, a management holding company principally held by Ron McMahan, James Dooley,
Sean Banchik; and Johnson Capital Residential Investments, LP.
Description of Advisory Services
The Adviser provides non-discretionary investment advice solely with respect to real property, mortgage
loans and related assets (collectively, "Real Estate Investments") to pooled investment vehicles (such
clients, collectively, "Clients").
Availability of Customized Services for Individual Clients
The Adviser intends solely to advise pooled investment funds and may tailor its services with respect to
the specific needs of the investors in each such investment fund.
Wrap Fee Programs
The Adviser does not participate in wrap fee programs.
Assets Under Management
As of December 31, 2018 the Adviser has approximately $899.6 million in regulatory assets
under management for which it provides non-discretionary advisory services.
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Clients are Qualified Purchasers
The Adviser currently only advises Clients that are "qualified purchasers" within the meaning of Section
2(a)(51) of the Investment Company Act of 1940.
Payment of Fees for Clients Generally
Management fees payable by a Client to the Adviser may be charged directly by the Adviser to the Client
as a first charge on distributable proceeds. Alternatively, the Adviser may request that investors in any
Client make a capital contribution to the Client in order to satisfy accrued and unpaid management fees.
Any incentive fees payable to the Adviser will be paid from distributable proceeds in the manner
specified in each Client's governing documents.
Additional Expenses and Fees for Clients Generally
In addition to management fees and incentive compensation earned by the Adviser, and unless otherwise
agreed to by the Adviser and a Client in writing, each Client shall be responsible for: (a) any U.S. federal,
state and local taxes and all filing fees payable with respect to its investments; (b) all costs, fees and
expenses relating to accountings and the preparation and mailing of financial, tax and performance reports
relating to its investments; (c) all filing and recording fees relating to real property and related mortgages
and other liens owned by the Client; (d) all expenses (including interest) associated with any financing
utilized for acquiring its investments; (e) any indemnification expenses relating to the Client's
investments; (f) any insurance, litigation, or broken deal expenses; and (g) any other fees or expenses that
are reasonably incurred in connection with the operation of business, maintenance or liquidation of the
Company.
Prepayment of Fees for Clients Generally
Clients are not required to pay fees to the Adviser in advance
Additional Compensation and Conflicts of Interest
The Adviser or its affiliates may earn a fee with respect to the sale of real property owned by a Client.
Such fees will be paid by the relevant listing agents engaged in the sale of such properties and not by any
such Client. Advisor may earn fees from originating loans to commercial holders of residential real estate
which may include entities financing properties acquired from a Client. Such financing decisions are
made independent of the sale of any asset. In addition, the Adviser or its affiliates may earn compensation
as a result of the securitization of Client assets. Any securitization of Client assets shall require a Client's
express written consent.
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MANAGEMENT The Adviser is entitled to performance-based compensation from its Clients. At present, the Adviser has
two Clients for which it provides non-discretionary asset management services. As a result, the Adviser
believes that no substantive conflicts of interest arise as a result of its entitlement to performance-based
compensation.
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AND RISK OF LOSS
The Adviser actively acquires, manages and disposes of investments in: (i) stocks, bonds, certificates and
other securities backed by non-performing, re-performing or distressed mortgage loans (“Loans”) secured
by residential real property (and in residential real property acquired as a result of the resolution of a Loan
(“REO Property”)) and (ii) interests (whether debt, equity or otherwise) in other entities that own stocks,
bonds, certificates and other securities backed by Loans or REO Property. The Adviser seeks to hold,
modify and service Loans, and then sell them as part of a portfolio of performing loans. The following
are some of the principal risks inherent in investment in Loans and REO Property.
Mortgage and Real Estate Related Investment Risks
The Adviser’s investment strategy of investing in Loans and REO Property subjects Clients to certain
risks including, among others: (i) continued declines in the value of real estate, (ii) risks related to general
and local economic conditions, (iii) possible lack of availability of mortgage funds for borrowers to
refinance or sell their homes or other real estate investments, (iv) overbuilding, (v) the general
deterioration of the borrower’s ability to keep a re-performing Loan current, (vi) increases in competition,
property taxes and operating expenses, (vii) changes in zoning and other applicable 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) uninsured damages from floods, earthquakes or other
natural disasters, (xi) limitations on and variations in rents, (xii) fluctuations in interest rates, (xiii)
foreclosure moratoriums and other requirements or restrictions on foreclosures that may extend the time
needed to foreclose, (xiv) the creation of new, or the extension of existing, homebuyer incentive
programs, (xv) new servicing or loss mitigation requirements and (xvi) new laws related to the origination
or servicing of mortgage loans
. To the extent that Clients' assets are concentrated geographically, by
property type or in certain other respects, such Client's assets may be subject to certain of the foregoing
risks to a greater extent.
The Adviser, or a servicer engaged by the Adviser, may be required to foreclose on certain Loans
resulting in a Client's ownership of or responsibility for REO Property. The ownership of REO Property
subjects the Client's portfolio of assets to greater concentration of real estate market risks and risks related
to real property ownership and management. Additionally, the Adviser will be required to comply with
zoning, maintenance and other laws applicable to the ownership of or responsibility for property and the
Adviser (and, as a result, a Client) may be subject to liability arising therefrom, such as personal injury
lawsuits, casualties and property taxes, and municipal fines. The Adviser cannot provide any assurance
that these risks can or will be mitigated through ownership structures designed to limit liability, through
the acquisition of appropriate insurance, or otherwise.
In states where foreclosure proceedings are subject to judicial oversight, a high volume of mortgaged
properties in foreclosure together with a limited number of courts equipped to handle such proceedings
have caused significant backlogs of cases extending the time between initial delinquency and ultimate
foreclosure. In addition, courts in judicial foreclosure states may require that the plaintiff in such cases be
in possession of all documents relating to the mortgage loan in foreclosure which, to the extent that the
related plaintiff is unable to locate and produce such documents, may delay foreclosure proceedings. An
extended foreclosure process will also increase the costs of liquidation, which will adversely affect a
Client's investment.
Loan Risks
Loan borrowers may have a variety of rights to contest mortgage loan enforceability and prevent or
significantly delay and increase the cost of any loan resolution or foreclosure action, including, without
limitation, allegations regarding fraud in the inducement by the original lender or broker, lender’s failure
to comply with certain statutory or regulatory requirements in connection with origination of the loans,
lender’s failure to produce the original documentation, improper mortgage assignment or recordation,
improper note endorsements, various other theories of lender or assignee liability, and relief through the
United States Bankruptcy Code and similar state laws providing debtor relief.
The Loans acquired by the Adviser on behalf of its clients will generally have been originated by third
parties
. While the Adviser will conduct due diligence with substantial assistance of third-party service
providers and other professionals, there is a risk that the mortgage loan documentation and calculations of
outstanding principal, interest, late fees and other amounts are deficient, incomplete or inaccurate and that
the Adviser will not detect such deficiencies and inaccuracies before acquisition
. Accordingly, the
Mortgage Loans may be compromised, reducing the value of a Client's investments.
The mortgage loan market is subject to occurrences of fraud, including personal identity theft
. Fraudulent
mortgage loans may not be identified as such due to internal control weaknesses and failure of the loan
originator or intermediary to determine that such mortgage loans may be fraudulent
. Such mortgage loans
could be acquired by the Adviser on behalf of its Clients despite the exercise of due diligence.
Since late 2006, delinquencies, defaults and foreclosures on residential mortgage loans have increased,
and may continue increase in the future. These increases have not been limited to “subprime” mortgage
loans, which are made to borrowers with impaired credit, but have also affected “Alt A” mortgage loans,
which are made to borrowers often with limited documentation, and “prime” mortgage loans, which are
made to borrowers with better credit who frequently provide full documentation. In addition to higher
delinquency, default and foreclosure rates, loss severities on all types of residential mortgage loans have
remained elevated due to prior declines in residential real estate values, resulting in reduced home equity.
There can be no assurances that a decline in property values will not resume and continue for an indefinite
period of time. Higher loan-to-value ratios generally could result in lower recoveries through foreclosure
and could result in an increase in loss severities above those that would have been realized had property
values remained the same or continued to appreciate.
Market conditions, increasingly restrictive lending standards and interest rate volatility may impair
borrowers’ ability to refinance or sell their properties, which may also contribute to higher delinquency
and default rates. In response to increased delinquencies and losses with respect to mortgage loans, many
mortgage loan originators have implemented more restrictive underwriting criteria for mortgage loans,
and most underwriting of mortgage loans is required to be “fully-documented.” More restrictive
underwriting criteria for mortgage loans may result in reduced availability of refinancing alternatives for
borrowers. The effectiveness of the “Qualified Mortgage” rule may further limit the availability of
refinancing alternatives for residential mortgage loans. These risks may be exacerbated by rising
mortgage interest rates. Home price depreciation may also leave borrowers with insufficient equity in
their homes to enable them to refinance. Borrowers who intend to sell their homes on or before the
maturity of their mortgage loans may find that they cannot sell their property for an amount equal to or
greater than the unpaid principal balance of their mortgage loans. While some mortgage loan originators
and servicers have created or otherwise are participating in modification programs in order to assist
borrowers with refinancing or otherwise meeting their payment obligations, not all borrowers will qualify
for or will take advantage of these opportunities.
The conservatorships of Fannie Mae and Freddie Mac in September 2008 have impacted both the real
estate market and the value of real estate assets generally. While Fannie Mae and Freddie Mac currently
act as the primary sources of liquidity in the residential mortgage markets, both by purchasing mortgage
loans for their own portfolios and by guaranteeing mortgage-backed securities, their long-term role is
uncertain. A reduction in the ability of mortgage loan originators to access Fannie Mae and Freddie Mac
to sell their mortgage loans may adversely affect the financial condition of mortgage loan originators. In
addition, any decline in the market value of securities issued by Fannie Mae and Freddie Mac may, in
turn, affect the market value of residential mortgage-backed securities generally
The lack of a functioning secondary market for private label mortgage-backed securities and mortgage
loans has also reduced the availability of certain types of mortgage products that do not fit within the
criteria of Freddie Mac, Fannie Mae or Ginnie Mae. These trends may reduce alternatives for mortgagors
seeking to refinance their mortgage loans. The reduced availability of refinancing options for mortgagors
may result in higher rates of delinquencies and losses on the Loans, including the mortgage loans
underlying investments made by the Adviser on behalf of its Clients.
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Registered investment advisers are required to disclose all facts regarding any legal or disciplinary events
that would be material to a client's or a prospective client's evaluation of the Adviser or the integrity of the
Adviser's management. There are no legal or disciplinary events that are material to an evaluation of the
Adviser’s advisory business or the integrity of the Adviser’s management.
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AFFILIATIONS Broker-Dealer Registration Status
The Adviser and its affiliates and their management persons are not registered as broker-dealers and do
not have any application to register with the Securities and Exchange Commission as a broker-dealer or
registered representative of a broker-dealer.
Futures Commission Merchant, Commodity Pool Operator, or Commodity Trading Adviser
Registration Status
The Adviser and its affiliates and their management persons are not registered as, and do not have any
application to register as, a future commission merchant, a commodity pool operator, or a commodity
trading adviser or an associated person of any of the foregoing entities.
Material Relationships or Arrangements with Industry Participants
The Adviser owns 66% of Foundation CREF, which is a commercial real estate lender. Certain employees
of Foundation of CREF are considered Access Persons of the Adviser. Occasionally, Foundation CREF
may lend for a property that will be an investment in the Fund. To mitigate this conflict, the Adviser has
developed a robust policy
Material Conflicts of Interest Relating to Other Investment Advisers
Not Applicable
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INTEREST IN CLIENT TRANSACTIONS AND PERSONAL TRADING The Adviser has adopted a code of ethics (the “Code of Ethics”) which sets forth high ethical standards of
business conduct that the Adviser requires of its employees, including compliance with applicable federal
securities laws. The Adviser and its personnel owe a duty of loyalty, fairness and good faith to each
Client, and have an obligation to adhere not only to the specific provisions of the Code of Ethics but to
the general principles that guide the Code of Ethics.
The Code of Ethics includes policies and procedures for the review of quarterly securities transactions
reports as well as initial and annual securities holdings reports that must be submitted by the Adviser’s
access persons. Among other things, the Code of Ethics also requires the prior approval of any acquisition
of securities in a limited offering (e.g., private placement) or an initial public offering. The Code of
Ethics also provides for oversight, enforcement and recordkeeping provisions.
The Code of Ethics further includes the Adviser’s policy prohibiting the use of material non-public
information. While the Adviser does not believe that it has any particular access to non-public
information, its employees are reminded that such information may not be used in a personal or
professional capacity.
A copy of the Code of Ethics is available to Clients and prospective clients. You may request a copy by
email sent to
[email protected] or by calling us at (562) 735-6555.
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Factors Considered in Selecting or Recommending Broker-Dealers for Client Transactions
The investments in each Client account consist of real property, mortgage loans and other real-estate
related instruments that are not traded through registered broker-dealers. This section is therefore not
applicable to the Adviser's business.
Research and Other Soft Dollar Benefits
The Adviser has not entered into written soft dollar arrangements and has no current intention to do so.
Order Aggregation
The assets purchased for the account of each Client are unique and will not be aggregated.
Brokerage for Client Referrals
The Adviser does not consider receipt of client referrals from a broker-dealer or third party in its selection
of broker-dealers.
Directed Brokerage
The Adviser does not currently recommend, request or require that a Client direct the Adviser to execute
transactions through a specified broker-dealer for the reasons described above.
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Frequency and Nature of Review of Client Accounts or Financial Plans
The Adviser performs various monthly, quarterly, annual and other periodic reviews of the assets in
Clients’ portfolios.
Factors Prompting Review of Client’s Accounts Other than a Periodic Review
A review of a Client account may be triggered by an unusual activity or special circumstance.
Content and Frequency of Account Reports to Investors in Clients
Within thirty (30) calendar days after the end of each fiscal quarter, unless such fiscal quarter is the last
fiscal quarter of any fiscal year of the Company, the Adviser will prepare: (a) an unaudited balance sheet
of the Client's investments dated as of the end of such fiscal quarter, (b) an unaudited related income
statement relating to the Client's investments for such fiscal quarter, (c) an unaudited statement of cash
flows related to such Client's account for such fiscal quarter.
Within forty- five (45) calendar days after the end of each calendar month, the Adviser will prepare: (a) a
status report of the activities in the Client's account during such calendar month, including descriptions of
additions to, dispositions of any mortgages and properties related to investments and any material legal
issues such as material claims filed or threatened against the Client and a monthly explanation of account
discrepancies, and (b) a monthly net asset valuation report as of the end of the preceding calendar month.
in accordance with methodologies agreed upon between the Adviser and the Client. In addition, if any
investment in a Client's account was liquidated during any month, the Adviser shall provide the Client
with a liquidation report detailing the proceeds received from the liquidated investment, all expenses
incurred with respect thereto and any realized profit or loss incurred in connection therewith.
The Adviser will prepare, or cause to be prepared, on an accrual basis in accordance with GAAP and on a
tax basis, at the expense of the Client, and furnish to the members of such Client no later than February
15th after the end of each fiscal year: (i) an unaudited balance sheet of the Client dated as of the end of
such fiscal year, (ii)an unaudited related income statement of the Client for such fiscal year, (iii) an
unaudited statement of each member's capital account in the Client for such fiscal year, (iv) an unaudited
statement of cash flows of the Client as of the end of the fiscal year, and (iii) such other supporting
schedules, reports and backup information as are reasonably requested by the members of such Client. In
addition, the Adviser will prepare, at the expense of the Client, and furnish to each member of the Client
prior to the April 15th immediately subsequent to the end of such fiscal year, (i) an audited balance sheet
of the Client dated as of the end of such fiscal year, (ii) an audited related income statement of the Client
for such fiscal year, (iii) an audited statement of cash flows for such fiscal year, (iv) a completed
Schedule K–1, and (v) an audited statement of each member’s capital account in such Client for such
fiscal year, all of which shall be certified in the customary manner by the Client's accountant (which firm
shall provide such balance sheet, income statement and statement of capital account in draft form to the
members of such Client for review prior to finalization and certification thereof).
The Adviser will furnish to each member of each Client at the expense of such Client, copies of all reports
required to be furnished to any lender of the Client.
The Adviser will prepare, or cause to be prepared, at the expense of each Client, and furnish to each
member of such Client (i) not later than each March 15 a schedule of estimated taxable income of such
Client for the year ending on the following December 31, (ii) not later than each April 30 a schedule of
estimated taxable income of such Client for the nine months ending on the following December 31, (iii)
not later than each July 30 a schedule of estimated taxable income of such Client for the six months
ending on the following December 31 and (iv) not later than each October 30 a schedule of estimated
taxable income of such Client for the three months ending on the following December 31. In addition, the
Adviser will prepare, at the expense of such Client, and furnish to each member of such Client (i) not later
than each April 21 a schedule of actual taxable income and book income of such Client for the three
months ending on the preceding March 31, (ii) not later than each July 21 a schedule of actual taxable
income and book income of such Client for the six months ending on the preceding June 30, (iii) not later
than each October 21 a schedule of actual taxable income and book income of such Client for the nine
months ending on the preceding September 30 and (iv) not later than each December 21 a schedule of
actual book income of such Client for the 11 months ending on the preceding November 30 and of
estimated book income of such Client for the one month ending on the following December 31 (including
all estimated accruals as of such December 31). All schedules of book income shall be prepared on a
GAAP basis.
Promptly after the end of each fiscal year, the Adviser will cause each Client's accountant to prepare and
deliver to each member of such Client a report setting forth in sufficient detail all such additional
information and data with respect to business transactions effected by or involving such Client during the
fiscal year as will enable such Client and each member thereof to timely prepare its federal, state and
local income tax returns in accordance with applicable laws, rules and regulations.
The Adviser shall prepare, or cause to be prepared, as a Client expense, such additional financial reports
and other information as the Adviser may reasonably determine are appropriate or as the Client may
reasonably request.
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The Adviser does not receive economic benefits from non-Clients for providing investment advice and
other advisory services. The Adviser does not compensate non-supervised persons for client referrals.
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Rule 206(4)-2 promulgated under the Advisers Act (the “Custody Rule”) (and certain related rules and
regulations under the Advisers Act) imposes certain obligations on SEC-registered investment advisers
that have custody or possession of any funds or securities in which any client of such registered
investment adviser has any beneficial interest. An investment adviser is deemed to have custody or
possession of client funds or securities if the adviser directly or indirectly holds client funds or securities
or has authority to obtain possession of them (regardless of whether the exercise of that authority or
ability would be lawful).
The Adviser will maintain the funds and securities (except for securities that meet the privately offered
securities exemption in the Custody Rule) over which it has custody with a “qualified custodian”.
Qualified custodians include banks, brokers, futures commission merchants and certain financial
institutions.
Each Client will receive account statements directly from the qualified custodian(s) that hold such Client's
assets. Clients should carefully review all account statements to ensure accuracy.
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The Adviser is not required to include a balance sheet for it most recent financial year, is not aware of any
financial condition reasonably likely to impair its ability to meet contractual commitments to Clients and
has not been the subject of a bankruptcy petition at any time during the past ten years.
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Open Brochure from SEC website