Kingsbridge Alternative Strategies Fund, LP Structured Home Equity - - PowerPoint PPT Presentation

1140 N. Town Center Dr. Suite 340, Las Vegas, NV 89144 | P: (702) 947-5160 | www.kingsbridgealts.com

Kingsbridge Alternative Strategies Fund, LP Structured Home Equity Investment Contracts

1140 N. Town Center Dr. Suite 340, Las Vegas, NV 89144 | P: (702) 947-5160 | www.kingsbridgealts.com

IMPORTANT DISCLOSURES: THIS IS NOT AN OFFER TO PURCHASE LIMITED PARTNERSHIP INTERESTS. THE OFFER AND SALE OF LIMITED PARTNERSHIP INTERESTS IN THE KINGSBRIDGE ALTERNATIVE STRATEGIES FUND, LP, A DELAWARE LIMITED PARTNERSHIP, IS MADE ONLY BY MEANS OF THE PARTNERSHIP’S LIMITED PARTNERSHIP AGREEMENT. THIS DOCUMENT IS NOT TO BE CONSTRUED AS INVESTMENT, LEGAL OR TAX ADVICE AND THIS DOCUMENT IS NOT INTENDED TO PROVIDE THE SOLE BASIS FOR ANY EVALUATION OF AN INVESTMENT STRATEGY. NOTHING CONTAINED HEREIN IS, OR SHOULD BE RELIED UPON AS, A PROMISE OR REPRESENTATION AS TO THE FUTURE PERFORMANCE OF THE KINGSBRIDGE ALTERNATIVE STRATEGIES FUND, LP. STATEMENTS, ESTIMATES, TARGETS AND PROJECTIONS WITH RESPECT TO SUCH FUTURE PERFORMANCE SET FORTH IN THIS DOCUMENT ARE BASED UPON ASSUMPTIONS MADE BY THE GENERAL PARTNER WHICH MAY OR MAY NOT PROVE TO BE CORRECT. NO REPRESENTATION IS MADE AS TO THE ACCURACY OF SUCH STATEMENTS, ESTIMATES, TARGETS AND PROJECTIONS. SIMILARLY, NOTHING CONTAINED HERIN IS, OR SHOULD BE RELIED UPON AS, A PROMISE OR REPRESENTATION AS THE EXTERNAL CONDITIONS AND CIRCUMSTANCES UNDER WHICH THE FUND WILL OPERATE (INCLUDING, WITHOUT LIMITATION, OVERALL MARKET CONDITIONS, TECHNOLOGY DEVELOPMENTS, STRATEGIC ALLIANCES AND OTHER MATTERS WHICH ARE OUTSIDE THE CONTROL OF THE GENERAL PARTNER).

Chief Investment Officer

David J. Dunn

President | CIO

David J. Dunn is the President and founder of Kingsbridge Wealth Management, Inc. David has been a portfolio manager for 22 years, and a private investment funds manager for 10 years, which includes the Kingsbridge Alternative Strategies Fund which began in 2009, as well as 4 venture funds.

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Nationally recognized valuation firm

Trusted Advisors

Home Equity Contracts

Investment Summary

There is a well-established debt (mortgage) market ~$12 Trillion, now there is an innovative non debt financing available to home equity rich homeowners

$31.8 TRILLION

US Residential Real Estate Market 2017

$31.8 TRILLION

US Residential Real Estate Market 2017

Home Equity Contracts provide liquidity to “Home Equity Rich” homeowners

• We invest at a discount to the fair market value
• f the home, which protects our downside
• We receive an accelerated upside participation

in any potential home price appreciation

• Structured as a participation agreement, of 10
• r 30 years
• Performance deed of trust collateralizes the

contract

• Home Equity Contracts align the interests of

both the homeowner and the investor

• Non Correlated asset class
• 7% Hurdle rate provides the benchmark for this

emerging asset class.

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The Kingsbridge Edge

• Structural Edge

Kingsbridge’s long-term family office capital has given us the ability to accept illiquidity and the courage to invest in non-conventional investments

• Kingsbridge seeded the test portfolios for two

Home Equity Contract Originators

• Access Edge

Sometimes there actually is “proprietary deal flow”, in the case of Home Equity Contracts we have a forward flow purchase contract in place along with negotiations with two additional Originators for additional forward flow purchase contracts

• Information, Execution & Analytical Edge

Kingsbridge has a complete data set on >400 Home Equity Contracts written since 2015, including ~60 contract exits. Kingsbridge is the only Fund with a focused strategy investing in Home Equity Contracts and with the data and analytics on multiple Originators of Home Equity Contracts

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Inception to date return

2009-2019

10.09%

Institutional Standards

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Portfolio Construction

• Portfolio & contract risk

controls- buy box and size criteria

• Defined underwriting

criteria

• Independent valuation
• Geographical

diversification

• Contracts sourced from

multiple originators

• Forward flow capacity to

meet investor demand

Risk Monitoring

• Property obligations (taxes,

HOA, insurance etc.)

• Homeowner financial

condition

• Sub-servicer in place for

contract term for financial transactions, liens, reconveyances, & legal actions if needed

• Custodial Services:

US Bank- custody of contracts

The Economics of the Opportunity

There is a demand for liquidity from equity rich homeowners

Home Equity: the difference between the value of the home and mortgage debt

• For ~70% of U.S. homeowners, home equity is their largest asset,

and home equity is greater than any investment or retirement savings

• In the past, there has only been three ways for homeowners to

access their home equity

• Sell the home
• Mortgage cash out refinance
• Home equity cash out or Home Equity Line of Credit

(HELOC)

• These previous options are costly, time consuming and in some

cases no longer available due to more stringent borrowing standards since the financial crisis

Home equity has increased from $6 trillion in 2011, to $15.7 trillion at the end

• f 2017

Home equity has increased $9.7 trillion since 2011

$9.7 Trillion

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Demand Leads to Innovation How is the capital used?

homeowners with significant equity seek non-debt solutions for many reasons. Adding additional debt often increases the homeowner’s financial risk, and strains cash flow. Non-debt home equity financing provides liquidity without the risk and cash flow strain of debt.

Home Equity Contracts (HECs) provide access to liquidity that solve real life problems for American homeowners

• Life Events: Divorce, medical expenses, education
• Investments, business start up
• Credit Repair
• Renovations
• Debt reduction to improve cash flow
• Reserves & lifestyle funding

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Debt 70.36% Renovations 12.05% Investments 8.22% Life Events 4.59% Credit Repair 2.87% Reserves 1.91%

Home Equity Contracts Components of Investment Return

Structure Discount

Home Price Appreciation

• The contract structure provides the investor with downside protection and

accelerated return participation throughout the life of the contract.

Gross Contract Investment Returns

• Results of

contract exits since 2015

• Non-Correlated

Returns

• Investment

Returns are Capital Gains

Gross Contract Investment Returns

• Results of

contract exits since 2015

• Non-Correlated

Returns

• Investment

Returns are Capital Gains

17% Gross IRR

• The risk adjustment or discount from the appraised value, is a direct source
• f return in the early years of the contract.
• If the contract stays in effect for more than 2 to 3 years, Home Price

Appreciation becomes a key factor in determining the rate of investor return for the contract.

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Example of a Home Equity Contract

• Risk Adjusted Value $729,000.00

Appraised Value – Risk Adjustment = $171,000

• Contract Amount $108,000 = 12% of Appraised Value
• 39% of $171,000 = $66,690

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351 Contracts Aggregate Appraised Value: $280,000,000 Aggregate Mortgage Debt: $125,500,000 Average Loan To Value: 45%

• Average homeowner

equity before Home Equity Contract: 55%

HOME HOME

• Average homeowner

equity after Home Equity Contract: 41%

• Average home equity contract: $94,500
• Average appraised home value: $798,100
• Average contract percentage of equity: 13%
• Average risk adjusted value: $656,200
• Average risk adjustment: 18%

Portfolio Characteristics

EQUITY CONTRACT PORTFOLIO VALUE EQUITY EQUITY

Contract terms

• 10 year: 88%
• 30 year: 12%

Lien Position

• 1st

6%

• 2nd 84%
• 3rd 10%

Kingsbridge Alternative Strategies Fund, LP Fund Details

Minimum Investment $1,000,000 Investor Eligibility Qualified Purchasers Lock up/Redemption 18 Month Lockup/Quarterly Redemption Fund Target Size $300,000,000 Management Fee/Performance Series B: 1.5% Management Fee 15% Performance Allocation on any return greater than 7% Administrator NAV Consulting Valuation Independant 3rd party- Information available upon request Legal Counsel Howard & Howard Auditor RSM LP Reporting Monthly Capital Account Statements Custodian for Home Equity Contracts US Bank NA

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Frequently Asked Questions

1. Why would anyone want such expensive financing?

• For approximately two-thirds of American households their home equity is their largest asset and many

homeowners may not have easy access to liquid capital. In this case, comparing the cost of capital of Home Equity Contracts to personal debt options such as credit cards and unsecured personal loans, which also come with the risks of added leverage and the burden of debt service, Home Equity Contracts are a solid choice, as they are not debt and do not adversely affect cash flow.

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• 2. What happens if the homeowner doesn’t exit the contract by the 10-year mark?
• Although the Fund has the right to foreclose on the property, that may not be the most optimal solution for

several reasons including the length of the process, the cost, and additionally it would be undesirable for all parties involved. A better solution would be to engage our contract originator to contact the homeowner to evaluate the situation and make other arrangements such as a new Home Equity Contract.

• 3. How will these contracts stand up to regulators, at both the state and federal level?
• The Originators have gone to great lengths to engage existing regulators in the creation and ongoing marketing
• f Home Equity Contracts. They continue to work with regulators as new states are included for Home Equity
• Contracts. Various regulators have submitted inquiries of the Originators; however their questions have been

addressed and answered without further issue.

Frequently Asked Questions

4. What happens if the homeowner defaults on the home or becomes financially distressed?

• Home Equity Contracts are written for homeowners with equity in their home. It is likely that at some point in the

life of the Fund, some homeowners may experience some level of financial hardship, however a small number of individual cases are not likely to have dramatic affect on the outcome of the Fund in its entirety.

5. How would these contracts fare in the face of another financial downturn or crisis?

• Research from the last financial downtown indicates that during a recession or poor housing market, equity

rich homeowners stay put, as evidenced by the reduced number of home sales during these periods. This factor may extend the duration of the Home Equity Contract. Our return models include the full duration of these contracts, and the potential returns in those scenarios.

• 6. How do Home Equity Contracts differ from Reverse Mortgages?
• Here are just a few ways Home Equity Contracts differ from Reverse Mortgages

Reverse Mortgage Home Equity Contract Mortgage Debt

Yes

No Equity Partipation

No

Yes Age Requirement

Yes

No Interest Charged

Yes

No

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Contact Us

Important Disclaimer: THIS IS NOT AN OFFER TO PURCHASE LIMITED PARTNERSHIP INTERESTS. THE OFFER AND SALE OF LIMITED PARTNERSHIP INTERESTS IN THE KINGSBRIDGE ALTERNATIVE STRATEGIES FUND, LP, A DELAWARE LIMITED PARTNERSHIP, IS MADE ONLY BY MEANS OF THE PARTNERSHIPS LIMITED PARTNERSHIP AGREEMENT. The realized returns of Home Equity Contracts that have exited are gross returns that do not include the cost of origination, servicing, fund expenses and the deduction of the performance allocation applicable to Series B limited partner interests, which is paid to the General Partner (as described in the Fund’s limited partnership agreement). Fund performance data quoted assumes the reinvestment of all distributions. Actual results will vary from

• ne limited partner to the next in accordance with the terms of the Fund’s limited partnership agreement. Past returns are not

indicative of future results and investors risk the loss of their entire investment. The material contained in this presentation is the intellectual property of Kingsbridge Wealth Management, Inc. and is not to be distributed to unrelated third parties of the authorized recipient without the express permission of Kingsbridge Wealth Management, Inc.

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