Newport Investment Management, LLC (“Newport”) is a Chicago based real estate
investment manager focused on acquiring, operating, financing and selling multiple
property types on behalf of its investors.
Newport’s primary business focus is closed-end comingled funds and separate accounts.
As such, its targeted approach to investing leads to restrictions articulated in Fund
offering documents.
Newport does not participate in wrap fee programs.
As of December 31, 2018, Newport managed approximately $315.77 million in
discretionary assets and approximately $ 18.0 million of non-discretionary assets.
On behalf of its clients, Newport currently manages:
• Newport Capital Partners Fund I, a closed end real estate fund targeting
convenience/necessity-based retail properties in major Midwestern metro areas
(the “Newport Fund I”). The Fund has acquired six investments since inception
and has completed its investment period. The Fund sold its first investment in
October 2016 and its second in August 2018. The Fund has raised $43.1 million
of Limited Partner capital and as of December 31, 2017 had Gross Asset Value of
$76.3 million.
• Newport Capital Partners Fund II, a closed end real estate fund targeting
convenience/necessity based retail properties in major metro areas in the
central United States (the “Newport Fund II”). Through December 31, 2018, the
Fund had acquired eight investments since inception. The Fund has raised $79.5
million of Limited Partner capital and as of December 31, 2018 had Gross Asset
Value of $205.0 million.
• DV Urban Realty Partners Fund I, LP, a closed-end opportunistic real estate fund
initially launched by DV Realty Advisors. In 2012, the Limited Partners
terminated DV Realty and requested that Newport become the General Partner
of this investment vehicle on a fixed fee basis (the “DV Fund”). The DV Fund
Completed its liquidation stage and closed all related litigation in 2018, no assets
under management remain.
• As of December 31, 2018, Newport also manages one independent real estate
investment with an approximate Gross Asset Value of $34.45 million.
• In July 2014 Newport was awarded a $50 million Joint Venture Commitment by
the NYSCRF / Artemis Emerging Manager Program. Mach I JV is a Joint Venture
focused on grocery anchored retail properties located within high population
density submarkets in Chicago and Minneapolis. The Fund acquired one
investment in July 2016. The Gross Asset Value as of December 31, 2018 was
$18.0 million.
Newport was formed in March 2010 and is wholly owned by Newport Capital Partners
Holding, LLC (NCPH). NCPH is 100% owned by Mr. Derrick E. McGavic.
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Newport is typically compensated via:
• Percentage of equity committed 50 - 150 bps
• Fixed Fee Variable
• Acquisition Fee 0 – 100 bps
• Disposition Fee 0 – 100 bps
• Financing Fee 0 – 100 bps
All fees are fully disclosed in Investment Advisory Agreements. Fees are negotiable.
Fees are billed to clients as an allocated expense to the real estate investment or to the
respective Fund.
There are no custodian fees.
Affiliates of Newport may earn property level fees (i.e., property management, leasing
commissions, and construction management) provided that they do not exceed
“market” rates.
Fees are typically paid quarterly, in advance, except for property level fees. If an
advisory contract is terminated before the end of the billing period, the client is due a
refund based on the pro-rata number of days Newport was the investment manager.
Neither Newport, nor any supervised persons, accepts compensation for the sale of
securities or other investment products.
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Newport has the potential to earn performance based fees from Newport Fund I.
Following is the cash flow waterfall:
1. All investors receive 100% of cash flow pari pasu to a 10% IRR;
2. From a 10% IRR to 13% IRR:
(a) 20% of profits to the “General Partner Investor.”
(b) 80% to all Limited Partners.
3. Above a 13% IRR:
(a) 25% of profits to the General Partner Investor
(b) 75% to all Limited Partners.
Payments 2(a) and 3(a) are the performance based fees. Performance based fees are
split 50% with the General Partner Investors and 50% to Newport.
Newport has the potential to earn performance based fees from Newport Fund II.
Following is the cash flow waterfall:
1. All investors receive 100% of cash flow pari pasu to a 9% IRR;
2. From a 9% IRR to 12% IRR:
(a) 10% of profits to Newport Capital Partners Holding
(b) 10% of profits to Special LP
(b) 80% to all Limited Partners.
3. Above a 12% IRR:
a) 12.5% of profits to the Newport Capital Partners Holding
b) 12.5% of profits to Special LP
c) 75% to all Limited Partners.
Payments 2(a)(b) and 3(a)(b)are the performance based fees. Newport receives
Performance Fees 2(a) and 3(a). Special LP Investors include Newport team members.
Newport clients also include accounts with and without incentives fees.
Since incentive fees are typically longer term payouts (up to 10 years), Newport avoids
conflicts of interest by awarding shares of incentive fees (“Points”) annually over the life
of the investment vehicle, with a 3 year vesting schedule to all employees, regardless of
their client assignment.
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Methods of analysis for real estate typically utilize Discounted Cash Flow analysis, Site
characteristics, area population and economic demographics.
As most of its investments are leveraged, the potential risk of loss is 100% of allocated
equity.
Newport primarily executes a “Value-Add” strategy to real estate investments along
with the “Core-Plus” Mach I JV real estate strategy.
Risks include:
• Leasing/re-leasing vacant space;
• Construction Costs associated with capital projects;
• Unanticipated tenant bankruptcies;
• Capital market fluctuations which occur during refinancing or sales
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Newport has no criminal or civil action pending or in the past 10 years.
Newport has not been involved in any administrative proceeding before the SEC, any
other federal regulatory agency, any state regulatory agency or any foregoing financial
regulatory authority.
Newport has not been involved with a Self-Regulatory (SRO) proceeding.
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Newport is not registered, nor has application pending to register, as a broker-dealer, a
registered representative of a broker dealer, futures commission merchant, commodity
pool operator, or a commodity trading advisor.
An affiliate of Newport, NCP Asset Management, LLC, is an Illinois Real Estate Broker.
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Trading Newport will provide a copy of its Code of Ethics to any client or prospective client upon
request.
Newport does not allow buying or selling on behalf of client account investments in
which the Firm or any related person has a material financial interest.
Newport, and related persons, may co-invest with clients on specific transactions. Such
co-investments are fully disclosed to clients and designed to align the interests of
Newport with its clients.
Newport and related persons are prohibited from buying or selling an investment which
is in close proximity, or would be economically impacted, at the same time it
recommends buying or selling to a client.
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Newport does not select or recommend broker dealers for client transactions.
Newport does engage licensed real estate brokers to sell assets, place mortgage
financing and lease space.
Prior to selecting a real estate broker, Newport solicits an RFP from at least two (2)
agents. Based upon the RFP, Newport selects the team that is most capable when
taking into account the type of the assignment, property type, and fee schedule.
Newport does not receive client referrals from broker dealers.
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Newport meets, in person or via tele-conference, with its clients no less than quarterly
to review client accounts. This is typically handled by the Firm’s Managing Principal
and/or the head of Asset Management.
If market conditions trigger the need for additional capital, a change in strategy (sale /
refinance) or merit discussion regarding investment strategy, a client review will occur.
Newport provides written quarterly financial reports with a narrative update. Newport
also provides a written yearly strategic plan with semi-annual updates and audited
Financial Statements for its Funds.
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Newport does maintain / manage bank accounts used by Property and Fund
investments. As part of the annual audit such banks statements are verified by
independent auditors.
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Newport does accept discretionary authority as allowed under individual investment
advisory agreements. Typically limitations are imposed via Fund investment strategy as
Limited Partner Advisory Committees.
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Newport Investment Management has no financial commitment that impairs its ability
to meet contractual and fiduciary commitments to clients, and has not been the subject
of bankruptcy proceeding.
Brochure Supplement - Part 2B of Form ADV Newport Investment Management, LLC A Wholly Owned Subsidiary of Newport Capital Partners Holding, LLC Contact Information:
Derrick E. McGavic
Managing Principal
350 N LaSalle Suite 700
Chicago, IL 60654
Office: (312) 724-7031
Fax: (312) 724-7049
[email protected]
www.newportcapitalptrs.com Derrick E McGavic
Anne C Arnold Andino
This Brochure Supplement provides information on our personnel listed above and
supplements the Brochure. You should have also received a copy of the Brochure.
Additional information about our personnel is available on the SEC’s website at
www.advisorinfo.gov.
Brochure Supplement prepared on March 27, 2019
Derrick McGavic Mr. McGavic is the Firm’s Managing Principal. He serves on the Firm’s Management and
Investment Committees.
Mr. McGavic has over 29 years of institutional and private real estate experience. Prior
to founding the Firm, Mr. McGavic was a Managing Director with RREEF where he ran
five separate co-mingled funds and two separate accounts with total AUM in excess of
$3.5 billion. Mr. McGavic was a member of the RREEF Value-Add / Venture Capital
Investment Committee and the RREEF Structured Debt / Mezzanine Fund Investment
Committee. Mr. McGavic also led major initiatives involving RREEF’s Structured Debt
Group and Client Relations.
Prior to joining RREEF in 2000, Mr. McGavic was with JE Roberts Companies and LaSalle
Partners (twice each) in acquisitions, portfolio management, M&A, loan workouts and
asset management. Over his career Mr. McGavic has executed more than $4.5 billion of
real estate transactions.
Mr. McGavic is a member of PREA, participating in the Valuations and Reporting Affinity
Group, ICSC and serves on Oregon State University School of Business’ Advisory Board.
Mr. McGavic is a former Officer of Marines.
Education
M.S. from the University of Southern California, a B.S. in Business and a B.S. in Naval
Engineering from Oregon State University
Anne Arnold Andino
Mrs. Andino is a Principal of the Firm and leads asset management and operations.
Mrs. Andino has over eighteen years of commercial real estate experience. Prior to
joining Newport Capital Partners, she was an Executive Vice President at IRC Retail
Centers. Mrs. Andino’s primary responsibilities included debt capital markets initiatives,
joint venture portfolio management, asset management, forecasting and valuation of
the real estate. She is a member of the International Council of Shopping Centers and is
a licensed real estate broker in Illinois. Mrs. Andino began her career as a commercial
real estate appraiser for Arthur Andersen before working in mortgage portfolio
management for Prudential Financial and in asset management at Morgan Stanley.
Education
Mrs. Andino holds a BS in Finance with a concentration in real estate from the University
of Illinois, Urbana-Champaign.
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