9% - 14% Annually
Capstone Financial LLC has formed CFV for the sole purpose of purchasing short to medium term, first deed of trust mortgages at low to mid leverage on assets including residential and commercial real estate (the “Loans”) from CTP Funding, LLC (the “Originator”) d/b/a Capstone Financial. CFV may also purchase performing mortgages located throughout the western region, to the extent permitted by law. The investment objective is to seek and deliver steady and above average cash flow return to investors while providing senior level collateral.
About the Loans in Capstone Fund V
The portfolio will consist of loans originated by Capstone Financial and will be senior secured asset-backed loans with the following criteria:
- Maximum loan to purchase value: 75%
- Maximum loan to after repaired value: 70%
- Required capital contribution by borrower: 20% of costs
- Interest rates: minimum 10.5%
- Loan term: 2-24 months
- Portfolio concentration:
- Real Estate Assets: 100%
- Hard money residential loans – up to 100%
- Construction loans – up to 20%
- Primary loans – up to 30%
- Business Loans (bridge or otherwise) – 20% maximum
- Existing loan purchases – 50% maximum (subject to real estate asset concentrations)
Loan servicing is conducted by Clear Spring Loan Servicing who specializes in 3rd party loan servicing. Clear Spring Loan Servicing has over 40 years of experience, and over 30 years of history in loss mitigation and default loan resolution.
Principal of the Manager is Tyler Stone with Warren Trangsrud as Senior Analyst. The principal and Senior Analyst have extensive experience in lending, managing, and investing in real property. In addition, Travis Leach, a Business and Finance partner at the national law firm of Ballard Spahr LLP has served as outside corporate counsel to CFV. Mr. Leach has extensive experience in corporate transactional matters, including compliance with the federal securities laws, mergers and acquisitions, and private equity.
Top Reasons to Invest in Capstone Fund V
1. Return on Investment & Yield
The projected yield to investors of Capstone Fund 5 is 9% to 14% with an 8% preferred yield to investors and a 50/50 split of remaining available cash between investors and the manager. If the average loan interest paid to the fund is 14%, it would result in an 11% return to investors. If the fund then retains some minimum leverage from a bank line, the return to investors increases.
2. Capital Preservation & Managing Risk
The maximum Loan to Value for any loan in Capstone Fund 5 will be 70% of As-ls appraised value. Capstone retains the same appraisal management services used in normal FHA/Conventional consumer lending. Borrowers and brokers are not allowed to interact or choose their own appraisers so there is decreased opportunity for an appraisal to be inflated by an borrower’s opinion. Capital Preservation is of extremely high priority.
3. Transparency & Monthly Reporting
Capstone Financial and Capstone Fund 5 uses nationally licensed and rated Clear Spring Loan Servicing out of Dallas, TX for all loan servicing and collections. Clear Spring issues a report each month for all prior month’s collections, pay-offs, and other loan activity. These reports are available to all Capstone Fund 5 investor upon request to help them monitor and track fund performance. Each month Capstone will also send each investor a 1 page, easy to read, statement with their interest payments.
4. 3rd Party Loan Servicing & Collections
Clear Spring Loan Servicinghas a full collections department integrated with its loan servicing platform. This allows all normally scheduled loan collections and default loan collections to be managed on the same platform. This integration helps keep the timelines between when a borrower misses a payment and when a default resolution or borrower reinstatement payment being collected to a minimum. Borrower defaults will always occur. Part of keeping Capstone investor’s capital secure while providing a attractive return is managing these defaulting borrowers effectively. In every case in Capstone’s history, a loan in default has resulted in extra revenue and a higher return on investment for Capstone on that particular file. Defaults are a revenue opportunity if managed correctly.
5. Deployment of Funds | Less Idle Time for Your Cash
Some investors involved with private lending have historically participated by a single loan at a time. However, when that loan pays off the investor is left with no yield until those funds are put to use again. Capstone Fund 5 addresses this problem by continually rotating its capital through loans. On any idle capital, investors are still paid a 2% preferred return beating any depository institution. The projections for Capstone Fund 5 to have idle capital is roughly 5%, keeping placement and returns high.
6. Liquidity and Leverage Using Bank Money
Capstone has met with several lending institutions and has a 2:1 equity to debt target. The use of some limited and conservative debt will help keep Capstone Fund 5 returns in the double digits while still reserving some liquidity to fund new loans, or liquidity for early investor exits when life events create the need.
7. Geographic Diversity | More Managing Risk
Capstone Fund 5, and Capstone Financial have a heavy emphasis on the Western region for placing loans. However, Capstone uses a national wholesale program to further diversify its assets geographically. As with any capital preservation strategy, some types of diversity are needed to reduce risk. As discussed, Capstone gets full 3rd party valuations and credit reports on every borrower to help identify quality files for funding in all geographic markets.
8. Licensed Loan Originator | Compliance with Dodd-Frank/CFPB
Capstone Financial is a licensed Mortgage Bank. With this licensing and working with rated servicer Clear Spring, Capstone makes every attempt to follow federal and state guidelines set by Dodd-Frank and the Consumer Financial Protection Board.
9. Standard Underwriting with Appraisals and Credit Checks
Each file Capstone Financial and Capstone Fund 5 funds has a full 3rd party valuation and credit reports from all 3 major credit agencies. This helps Capstone evaluate each property, and each borrower, for every loan file. These requirements are a minimum, frequently Capstone requires borrowers to supply historical banks statements and tax returns to help support due diligence efforts. These additional items help ensure a borrower has the ability to make monthly payments on their loan while it is in Capstone or Capstone Fund 5’s portfolio.
10. Experienced Team | We have never lost any principal
Capstone Financial has never lost any principal amount in any default scenario. The Capstone Fund 5 management team has extensive experience in selling bank owned properties and has access to a national network of other experienced real estate professionals to manage the same process profitably when needed.
11. 1st Lien Position | Be the Bank, Be more Secure
Capstone Fund 5 will always be in 1st position on any collateral for a loan. Capstone will not lend above 70% Loan to Value on any of these 1st position liens. While real estate 1st position liens do not guarantee against any capital loss, as proven by the last real estate crash, a conservative valuation approach combined with a conservative Loan to Value limit help ensure reasonable security in Capstone’s collateral positions. There will be no 100% loans, no 90% loans, no 80% loans, …70% of retail value MAX!
12. Capstone is Enjoyable to Work With
Above everything, we all choose with whom to spend time and do business. Sometimes this is by necessity early one’s career and life journey. However, in this instance, it is purely a choice based on investment goals and having confidence you will enjoy working with the team at Capstone. Any business relationship, or any relationship period, will have instances of frustration, hardship, and confusion. If one does not choose enjoyable people to work with initially, all these instances become even more aggravating. Capstone is a team of capable and enjoyable people who work hard at solving problems and ironing out the wrinkles life throws adeptly. Please feel free to request a call or a personal visit to our office in Scottsdale to meet and go through any questions you may have.