CIG has been investing in assets for more than 20 years. Our historical performance to external investors (since 2011) is an equity return of 63%+ and a Net IRR of 37.3%.
CIG affiliated companies, principals, employees and family invest approximately 10% of capital in every deal. We believe it is important to align our interests with those of our investors. A significant amount of our personal balance sheet is invested alongside members in our Fund.
CIG has a very investor-friendly waterfall. Investors earn 8% preferred return on their called equity. Once this hurdle is met, the common members are allocated 80% of the next tranche of return and the managing member is allocated 20% up to a 14% return to common members. Thereafter, the return moves to 70% common member and 30% to managing member. There is no catchup to the managing member on the 8% preferred.
CIG typically buys multi-family portfolios in secondary or tertiary cities, with a unit count of 300-1500. These assets usually have a high degree of managerial distress. While there is always some deferred maintenance, and some capital projects that necessitate a capital infusion, primarily we target assets that have been (or continue to be) mismanaged by sellers. These sellers simply don’t have the capital or the knowhow to turn assets around.
Management Fees are 2% on investments <$5MM and 1.5% on investments >$5MM. During the investment period, fees are charged on committed capital and switch to called capital, post the investment period. Many funds charge fees on called capital and switch fees to “value” post investment period. However, we feel that this does not align with investors’ best interest since many funds will try to acquire assets (that may not be ideal), simply to charge fees. Moreover, these funds will also mark assets such that they can ramp these fees (sometimes more than 2-3x cost basis) in order to increase the management fee charge. We do not align with this practice.
Equalization interest is charged to investors who invest in the Fund post the initial closing. Interest is charged to new round investors (and paid to prior round investors, not the Fund) at 8% per annum based on the date of subsequent closings. Equalization interest is calculated based on a per day rate if the new round investor is considered invested from the first closing date. For example, if the fund called 50% of the capital on a $1M investment made by 2 investors, each investor would submit $250,000 for a total of $500,000 or 50% of committed equity. Ninety days later, if the Fund closed an additional $1M of capital, the total committed capital would be $2M and the invested capital would only be $500,000. As such, the new investors would be charged equalization interest as follows:
90 days / 365 days x $500,000 (50% capital call) x 8% = $9,863 in interest payable to first round investors by second round investors
Preferred return is a minimum rate of return that a common member can expect prior to any participation by the managing member. Preferred return is calculated based on called capital x 8% per annum (simple).
Typically, retirement accounts (Roth IRA, conventional IRA, SEP IRA, etc.) dollars can be invested in the Fund. While theoretically possible, rules around 401(k) and 403(b) account funds are more complex and may require prior approval from the plan sponsor.
Investment performance is calculated by NAV Consulting who is the Fund’s administrator. Information is presented in NAV’s investor portal.
Investment questions can be sent directly to IR@clearinvestgroup.com or we would be happy to schedule a call with one of our management team members.
