(A) Operational and Organizational Information. CWCapital
Investments LLC (“CWCI”), a U.S. Securities and Exchange
Commission (“SEC”) registered investment adviser, is one of several
affiliated entities in the CW Financial Services LLC (“CWFS”) family
of companies. This family of companies also includes (i) CWCapital
Asset Management LLC (“CWCAM”), a commercial real estate loan
management and special servicing company, (ii) ConvergentRisk
Insurance Agency LLC (“CRIA”), a risk and insurance services group,
(iii) CWFS Insight LLC (“CWFS Insight”), a software development and
service company, (iv) CWFS – REDS LLC (“REDS”), a commercial
real estate broker, (v) CWCapital Markets LLC (“CWMarkets”), a
commercial mortgage intermediary, (vi) CW CCR LLC (“CCR”), an
entity that serves as the designee for the controlling class holder at the
request of certain CWCAM clients, (vii) CW Church Ranch Holdings,
LLC which holds a partnership interest in real estate (“Holdings”), (viii)
DIG Sunrise Springs Holdings, LLC (“DIG”) which owns real estate,
and CW Sunrise Springs Holdings, LLC (“CWSS”) which owns DIG,
(ix) GIG CW Park Place, LLC (“Park”) which owns real estate, and
CW Park Place Holdings, LLC (“CWPark”) which owns Park. Each of
CWCI, CWCAM, CRIA, CWFS Insight, REDS, CWMarkets, CCR and
Holdings is a wholly-owned subsidiary of CWFS. CWFS owns
approximately 88% of CWSS and 87% of CWPark. As stated on the
cover page of this Disclosure Document, registration as an investment
adviser does not imply a level of skill or training. CWCI has been in
business since January 2004. The principal owner of CWCI is CWFS.
CWFS is indirectly wholly owned by certain funds managed by
affiliates of Fortress Investment Group LLC (“Fortress”). Affiliates of
Fortress, including FIG LLC (801-62982), are themselves registered
investment advisers and have filed their own Form ADV Part 1 and 2.
In order to obtain copies of such materials, please see
www.advisorinfo.sec.gov. On February 14, 2017, Fortress and SoftBank Group Corp., a corporation
organized under the laws of Japan (“SoftBank”) issued a joint press
release announcing that they had entered into definitive agreements
pursuant to which SoftBank will acquire Fortress. On December 27,
2017, SoftBank completed its acquisition of Fortress which is now
operated within SoftBank as an independent business.
(B) Types of Advisory Services Offered.
CWCI offers discretionary investment advisory services to its clients,
may act as the Disposition Consultant, Collateral Administrator, or
Collateral Manager, and may also offer analytic and consulting services.
These services include proprietary and credit-intensive real estate
analytics, surveillance and due diligence services that help financial
institutions and investors navigate complex real estate debt investments
and portfolios, although these services are primarily offered through
CWFS and its other subsidiaries.
(C) Client Investment Guidelines and Parameters. CWCI enters into a
management (or similar) agreement with each of its advisory clients,
which sets forth the specific advisory services that CWCI is obligated to
provide for that client. Each management agreement is tailored to the
individual needs of the particular client. As Collateral Manager/
Administrator of CDO clients, CWCI has the authority to make
investment decisions where it deems appropriate and without prior
consultation with the CDO client, subject to the investment guidelines
and/or restrictions contained in the relevant CDO transaction
documents. As Disposition Consultant in various CDO transactions,
CWCI has an advisory role with respect to providing consents to the sale
of securities initiated by the CDO Collateral Manager (typically an
unrelated third party) subject to the terms of the relevant disposition
consultant agreement.
(D) Wrap Fee Programs. CWCI does not participate in wrap fee programs.
(E) Client Assets Under Management. Discretionary: $409,776,020 as of December 31, 2019.
please register to get more info
(A) All fees are individually negotiated and, in each case, are set forth in the
related management or advisory agreement. Circumstances considered
when negotiating fees may include, without limitation, customary
market rates, types of services, specialized guidelines and other
performance/incentive fee arrangements with the client.
Management or advisory fees for separately managed or pooled
investment accounts are typically calculated based on an annual
percentage of the balance of, or capital invested in, the assets under
management.
In addition, CWCI may collect incentive fees based on the performance
of investments. Please refer to Section 6 below for a more detailed
description of the incentive fee arrangements, and related conflicts of
interest.
(B) Payment of Fees. CWCI’s fees are typically paid periodically (monthly
or quarterly) as specified in the relevant investment management
agreement. For certain clients, the management fees will be directly
deducted from client assets. In the case of CWCI’s CDO clients, the
related trustee will deduct CWCI’s fees from collections on the
underlying assets, and remit such fees to CWCI on the same day that
distributions are made to the related investors. For other clients, CWCI
will bill clients for management fees incurred.
(C) Additional Fees. Clients may be required to pay for certain expenses
incurred by CWCI in connection with the performance of the advisory
services, in each case as specified in the related management agreement
or the related offering document. In addition, certain CDO clients are
obligated to pay advancing agent fees (to CWCI, acting as advancing
agent), which would be in addition to any management fees to the extent
applicable.
(D) Fees and Compensation to Affiliated Entities.
Affiliates of CWCI may provide services, directly or indirectly, to CMBS
Trusts that are held in the CDOs and CMBS Re-Remics for which CWCI
acts as Collateral Manager, Collateral Administrator or Disposition
Consultant. These affiliates are compensated as follows:
• CWCAM, acting as special servicer to certain CMBS Trusts,
receives special servicing and ancillary fees as set forth in the applicable
CMBS Pooling and Servicing Agreement.
• CWFS Insight hosts the Marketplace auction platform, which is
licensed by REDS to market properties for sale by CMBS Trusts and
third parties. CWFS Insight does not currently, but might in the future,
receive compensation for hosting the Marketplace auction platform from
the CMBS Trusts and third parties.
• REDS executes CWCAM’s sale strategy for certain CMBS Trust
assets in conjunction with a third-party listing broker retained by
CWCAM. REDS receives a co-broker commission from the third-party
listing broker and a percentage of the Marketplace platform fee paid to
Marketplace by the buyer at the closing of each asset sale unless
prohibited by the applicable Pooling and Servicing Agreement.
• CRIA is compensated for insurance services that are provided to
third-party clients, including insurance brokers that place insurance for
CWCAM on CMBS Trust assets. CRIA has no contracts or involvement
with, nor does it receive compensation from, CMBS Trusts.
• CWMarkets connects borrowers to the commercial real estate
capital markets and earns fees through successful placement of capital
into transactions. CWMarkets is paid either by the capital source for
placement of capital or by borrowers for sourcing capital. CMBS Trusts
do not compensate CWMarkets related to these services.
(E) Fees Paid in Advance.
CWCI is permitted to collect management fees from certain investors in
advance and generally will refund unearned pre-paid management fees if
the advisory contract is terminated prior to the end of the applicable
period. Such refund is calculated on a pro rata basis for the number of
days the fee is unearned.
(F) Compensation for the Sale of Securities or Other Investment Products.
Neither CWCI nor any CWCI personnel accept compensation for the sale
of securities or other investment products.
please register to get more info
With respect to certain clients, CWCI may collect incentive fees based on the
performance of investments. Such fees will be structured and charged in a
manner consistent with the requirements of applicable law, including the
Investment Advisers Act of 1940. An incentive fee arrangement may create an
incentive for CWCI to make investments that are riskier or more speculative
than would be the case in the absence of an incentive fee or to favor those clients
that allow CWCI to earn performance fees over clients that do not. CWCI’s
policies and procedures are intended to identify and mitigate these and other
potential conflicts and to assure that CWCI’s interests are not conflicted with
those of its clients or any investors or, if such interests are conflicted, that CWCI
acts in the best interests of its clients.
CWCI does not represent that the amount of the incentive fees or the manner of
calculating the incentive fees is consistent with other performance related fees
charged by other investment advisers under the same or similar circumstances.
The incentive fees charged by CWCI may be higher or lower than the incentive
fees charged by other investment advisers for the same or similar services.
please register to get more info
CWCI advises domestic and foreign pooled investment vehicles and third party
separate accounts formed for the purpose of investing in real estate debt
products.
please register to get more info
(A) CWCI provides advisory services with respect to investments in various
forms of commercial real estate debt instruments. Each investment is
selected in accordance with the restrictions and guidelines set forth in the
relevant CDO transaction documents. With respect to investments in
whole loans, B Notes, mezzanine loans or CMBS, CWCI or an affiliate
will typically underwrite the related assets. The scope and degree of the
underwriting will vary for each investment. In each case, the
underwriting involves information gathered from publicly available
sources or from private sources subject to the terms of a confidentiality
agreement with the information provider and the use of CWCI’s
proprietary analytical models and other resources. CWCI uses the
underwriting analysis to estimate anticipated losses on the related assets,
and thereby determine the appropriate price.
Investing in securities involves significant risks, including the risk that
an investor could lose some or all of any invested capital.
In addition, the Collateral Manager, its affiliates and/or its clients may
invest in securities that are senior or subordinated to, or have interests
different from or adverse to, the Collateral Debt Securities or the holders
of the Notes and such persons may possess information relating to the
Collateral Debt Securities not known to the Collateral Manager.
Further, the Collateral Manager serves or may serve as adviser to one or
more Client accounts, and/or may engage in any other business and
furnish investment management advisory services, such as serving as
consultant or servicer for investing in, lending to, being affiliated with
or have other ongoing relationships with, other entities organized to issue
CDOs secured by assets similar to the Clients’ Collateralized Debt
Securities.
(B) and (C) Substantially all of the investments managed by CWCI are debt
instruments that are backed directly or indirectly by commercial and
multi-family real estate properties. The repayment of a commercial real
estate loan is typically dependent upon the ability of the related property
to produce cash flow through the collection of rents and other income.
Even the liquidation value of a commercial property is determined, in
substantial part, by the capitalization or multiple of the property’s ability
to produce cash flow. However, net operating income can be volatile and
may be insufficient to cover debt service on the loan at any given time.
The net operating incomes and property values of the properties may be
adversely affected by a large number of factors. Some of these factors
relate to the properties themselves, including, but not limited to:
• the age, design and construction quality of the properties;
• perceptions regarding the safety, convenience and attractiveness
of the properties;
• the characteristics of the neighborhood where the property is
located;
• the proximity and attractiveness of competing properties;
• the adequacy of the property’s management and maintenance;
• increases in interest rates, real estate taxes and other operating
expenses at the mortgaged property and in relation to competing
properties;
• an increase in the capital expenditures needed to maintain the
properties or make improvements;
• dependence upon a single tenant or a concentration of tenants in
a particular business or industry;
• a decline in the financial condition of a major tenant;
• an increase in vacancy rates; and
• a decline in rental rates as leases are renewed or entered into
with new tenants.
Certain properties are secured in whole or in part by recently constructed
properties or recently acquired properties that have no prior operating
history and lack historical financial figures and information.
Other risk factors are more general in nature, and include the following,
without limitation:
• national, regional or local economic conditions, including plant
closings, military base closings;
• macro pandemic events which cause major economic
disruption;
• potential impact of climate change;
• industry slowdowns and unemployment rates;
• local real estate conditions, such as an oversupply of competing
properties, retail space, office space or multifamily housing or
hotel capacity;
• demographic factors;
• consumer confidence;
• consumer tastes and preferences;
• retroactive changes in building codes;
• changes or continued weakness in specific industry segments;
• location of certain properties in less densely populated or less
affluent areas; and
• the public perception of safety for customers and clients.
The volatility of net operating income will be influenced by many of
the foregoing factors, as well as factors such as:
• the length of tenant leases (including that in certain cases, all or
substantially all of the tenants, or one or more sole, anchor or
other major tenants, at a particular property have leases that
expire or permit the tenant(s) to terminate its or their lease(s)
during the term of the loan);
• the creditworthiness of tenants;
• tenant defaults;
• the rate at which vacant space or space under expiring leases is
re-let;
• the property’s “operating leverage” which is generally the
percentage of total property expenses in relation to revenue;
• the ratio of fixed operating expenses to those that vary with
revenues; and
• the level of capital expenditures required to maintain the property
and to retain or replace tenants.
A decline in the real estate market or in the financial condition of a major tenant
will tend to have a more immediate effect on the net operating income of
properties with short-term revenue sources, such as short-term or month-to-
month leases or leases with termination options, and may lead to higher rates of
delinquency or defaults. In addition, underwritten or adjusted cash flows, by their
nature, are speculative and are based upon certain assumptions and projections.
The failure of these assumptions or projections to prove correct in whole or in
part could cause the underwritten or adjusted cash flows to vary substantially
from the actual net operating income of a property.
Cybersecurity Risk.
CWCI’s information and technology systems may be vulnerable to damage or
interruption from computer viruses, network failures, computer and
telecommunication failures, infiltration by unauthorized persons and security
breaches, usage errors by its professionals, power outages and catastrophic events
such as fires, tornadoes, floods, hurricanes and earthquakes. Although CWCI has
implemented various measures to manage risks relating to these types of events,
if these systems are compromised, become inoperable for extended periods of time
or cease to function properly, CWCI may have to make a significant investment
to fix or replace them. The failure of these systems and/or of disaster recovery
plans for any reason could cause significant interruptions in CWCI’s operations
and result in a failure to maintain the security, confidentiality or privacy of
sensitive data, including personal information relating to investors (and the
beneficial owners of investors). Such a failure could harm CWCI’s reputation or
subject it or its affiliates to legal claims and otherwise affect their business and
financial performance.
please register to get more info
Neither CWCI nor any of its supervised persons has been involved in any legal
or disciplinary events that are material to a client’s or prospective client’s
evaluation of our advisory business or the integrity of our management.
please register to get more info
(A) Registered Broker-Dealer or Registered Representative.
Neither CWCI nor any CWCI personnel are registered, or have an application
pending to register, as a broker-dealer or registered representative of a broker-
dealer.
(B) Registered Futures Commission Merchant; Commodity Pool Operator, Commodity Trading Advisor or Associated Person. Neither CWCI nor any CWCI personnel are registered, or have an application
pending to register, as a futures commission merchant, commodity pool
operator, commodity trading advisor, or an associated person of such entities.
(C) Other Relationships or Arrangements.
CWCI is wholly owned by CWFS. CWFS is in turn owned by certain funds
managed by affiliates of Fortress Investment Group LLC. As noted in Item
5.D, affiliates of CWCI provide services to CWCI’s clients and receive
compensation for such services, either from CWCI’s clients or third parties.
Disclosure with respect to these engagements, where applicable, have been
disclosed in the offering documents of CWCI’s clients.
(D) Recommendation of Other Investment Advisors and Other Conflicts of Interest.
Affiliates of CWCI can exercise fair value purchase options on some loans
held in CMBS trusts specially serviced by CWCAM for which CWCI serves
as the controlling class representative. These options afford the right to
purchase the loans at their fair value as determined by the special servicer. The
rights and obligations associated with, and the process for, the exercise of fair
value options are expressly set forth in the relevant applicable CMBS pooling
and servicing agreement (“PSA”) among various unaffiliated parties. When
the special servicer or its affiliate exercises the option, the relevant CMBS
trustee or master servicer, neither of which is affiliated with CWCI, is required
by the applicable PSA to review and approve the fair value determination.
please register to get more info
Personal Trading. (A) Code of Ethics.
The code of ethics of CWCI (the “Code of Ethics”) is based upon the premise
that all CWCI personnel have a fiduciary responsibility to render
professional, continuous, and unbiased investment advisory services. The
Code of Ethics requires all personnel to: (1) comply with all applicable laws
and regulations; (2) observe all fiduciary duties and put the clients’ interests
ahead of those of CWCI; (3) observe CWCI’s personal trading policies so as
to avoid “front-running”; and (4) ensure that all personnel have read the
Code of Ethics, agreed to adhere to the Code of Ethics, and are aware that a
record of all violations of the Code of Ethics will be maintained by the Chief
Compliance Officer and that personnel who violate the Code of Ethics are
subject to sanctions by CWCI, including termination.
A copy of the Code of Ethics is available upon request to clients and
prospective clients.
(B) Participation or Interest in Client Transactions.
CWCI and/or its related persons may recommend to clients in certain
investment vehicles it manages that they buy or sell interests in the same
investment products in which it or related persons have some financial
interest, including ownership. CWCI’s policies and procedures are intended
to identify these and other potential conflicts and to assure that CWCI’s
interests are not conflicted with those of its clients.
CWCI may recommend the purchase or sale of a security to a client in which
CWCI and related persons also have a position or interest in the same
security or various classes of the same security. These clients could have
different rights with respect to the securities that may give rise to conflicts
in the decisions made by CWCI, related persons and affiliates in the event
of a default or workout situation. These situations could potentially raise or
give the appearance of an unavoidable and irreconcilable division of
interests and responsibilities with respect to multiple parties. CWCI’s
policies and procedures are intended to identify these and other potential
conflicts and to assure that CWCI’s interests are not conflicted with those of
its clients or any investors or, if such interests are conflicted, that CWCI acts
in the best interests of its clients.
(C) Purchase and Sales of Securities by Related Persons. CWFS previously
purchased certain controlling class CMBS and other assets sold by
American Capital, Ltd. through a private bond offering.
please register to get more info
The factors that CWCI considers in selecting or recommending broker-
dealers for client transactions and determining the reasonableness of their
compensation are described herein. CWCI does not utilize soft dollars.
(A) 1. Best Execution To the extent CWCI executes securities transactions
for a client through a broker, CWCI will seek to obtain best execution for
such client by taking into account the following factors, without
limitation: the ability to effect prompt and reliable executions at favorable
prices (including the applicable dealer spread or commission, if any); the
operational efficiency with which transactions are effected, taking into
account the size of order and difficulty of execution; and the financial
strength, integrity and stability of the broker.
2. (a) and (b) Brokerage for Client Referrals. CWCI does not consider
client referrals in the selection of broker-dealers to execute client trades.
3. Directed Brokerage. CWCI does not recommend, request or require
that a client direct the execution of its account transactions to a specified
broker-dealer. Further, CWCI does not permit a client to direct its
brokerage to a specified broker-dealer.
please register to get more info
(A) With respect to each of CWCI’s CDO clients where CWCI acts as
collateral manager/administrator, CWCI’s portfolio management
personnel reviews the assets held by such client on a monthly basis. Such
review is conducted by a senior vice president in the CDO portfolio
management group and entails review of the trustee report with respect
to each asset held by such client or, with respect to certain loan assets,
inquiry with the related servicer. With respect to each such CDO client,
each month the related trustee prepares a monthly written report
regarding the assets held by such CDO client. In addition, with respect
to certain CDO clients, each quarter the related trustee prepares a note
valuation report which provides additional information regarding such
assets. CWCI’s portfolio management personnel confirm the
information in each report before it is finalized. CWCI will review
specific assets of a particular CDO client or fund client upon the
occurrence of a material event with respect to such asset.
(B) The current and historical monthly and quarterly reports prepared by the
third party trustees for each of CWCI’s CDO clients are posted to the
trustee’s website and are available for review by the investors in such
CDO clients. Any reports prepared by CWCI are also available on the
trustee’s website.
please register to get more info
(A) Compensation Received By CWCI for Client Referrals. Neither CWCI
nor any CWCI personnel receive any direct or indirect compensation for
client referrals.
(B) Compensation Paid By CWCI or Related Person for Client Referrals.
Neither CWCI nor any Related Person directly or indirectly compensate any
party for client referrals.
please register to get more info
CWCI exercises discretionary authority to manage securities on behalf of certain
clients. In some circumstances, this authority may include exercising rights
associated with such securities (always within a set of investment guidelines)
and may be subject to the approval of an investment committee, which includes
employees of CWCI.
please register to get more info
CWCI does not invest in securities for which proxy votes are typical. However,
while such transactions may not meet the technical definition of a “proxy vote,”
from time to time, CWCI may be called upon to make a decision in the context
that a client is the holder of the controlling class in a CMBS transaction. CWCI
has elected to consider such transactions as proxy votes for the purpose of this
Section 17.
CWCI’s policy is to act in accordance with any specific requirements of the
relevant advisory agreement that may be in place and to comply with any
requirement of the applicable transaction documents. Notwithstanding this
policy, where CWCI acts as a proxy on behalf of its clients, its policy is to
exercise the proxy vote in the best interests of the client taking into consideration
all relevant factors including, without limitation, acting in a manner that CWCI
believes will maximize the economic benefits to the client (taking into
consideration the client’s investment objective and risk profile). In the unlikely
event that CWCI believes that a potential conflict of interest may exist between
the interest of the client and CWCI in connection with a proxy vote that it is
exercising on behalf of a client, CWCI will review the matter to ensure that the
client’s interests are placed ahead of any interest that CWCI may have in
connection with the vote. CWCI will not neglect its proxy voting
responsibilities, but the Company may abstain from voting if it deems that
abstaining is in its clients’ best interests, such as having made a determination
that the costs of voting outweigh the perceived benefits of voting. Position size
is not determinative. CWCI’s Chief Compliance Officer prepares and maintains
memoranda describing the rationale for any instance in which CWCI does not
vote a client’s proxy or chooses to vote against management’s recommendation.
please register to get more info
(A) CWCI does not require or solicit prepayment of any fees six (6) months
or more in advance.
(B) To the best of our knowledge, there exists no financial condition that is
reasonably likely to impair our ability to meet our contractual
commitments to our clients.
(C) CWCI has not been the subject of a bankruptcy petition at any time
during the past ten years.
please register to get more info
Open Brochure from SEC website