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). 1140 N. Town Center Dr. Suite 340, Las Vegas, NV 89144 | P: (702) 947-5160 | www.kingsbridgealts.com
Chief Investment Officer 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 David J. Dunn in 2009, as well as 4 venture funds. President | CIO Trusted Advisors Nationally recognized valuation firm 3
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 Home Equity Contracts provide liquidity to “Home Equity Rich” homeowners We invest at a discount to the fair market value • $31.8 $31.8 of the home, which protects our downside TRILLION TRILLION • We receive an accelerated upside participation US Residential US Residential Real Estate Real Estate in any potential home price appreciation Market 2017 Market 2017 • Structured as a participation agreement, of 10 or 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. 4
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 10.09% Kingsbridge has a complete data set on >400 Home Equity Contracts written since 2015, including ~60 Inception to contract exits. Kingsbridge is the only Fund with a date return focused strategy investing in Home Equity Contracts 2009-2019 and with the data and analytics on multiple Originators of Home Equity Contracts 5
Institutional Standards Portfolio Construction Risk Monitoring Portfolio & contract risk • • Property obligations (taxes, controls- buy box and HOA, insurance etc.) size criteria • Homeowner financial • Defined underwriting condition criteria Sub-servicer in place for • Independent valuation • contract term for financial transactions, liens, Geographical • reconveyances, & diversification legal actions if needed • Contracts sourced from Custodial Services: • multiple originators US Bank- custody of contracts Forward flow capacity to • meet investor demand 6
The Economics of the Opportunity There is a demand for liquidity from equity rich homeowners For ~70% of U.S. homeowners, home equity is their largest asset, • and home equity is greater than any investment or retirement savings Home Equity: the difference between the value of the home In the past, there has only been three ways for homeowners to • and mortgage debt access their home equity Home equity has increased • Sell the home from $6 trillion • Mortgage cash out refinance in 2011, to $15.7 trillion at the end Home equity cash out or Home Equity Line of Credit • of 2017 (HELOC) • These previous options are costly, time consuming and in some $9.7 Trillion cases no longer available due to more stringent borrowing standards since the financial crisis Home equity has increased $9.7 trillion since 2011 7
Demand Leads to Innovation How is the capital used? Home Equity Contracts (HECs) provide access to liquidity that solve real life problems for American homeowners Renovations 12.05% • Life Events: Divorce, medical expenses, education Investments 8.22% • Investments, business start up Credit Repair • Life Events 4.59% Credit Repair Renovations • 2.87% Debt Reserves 70.36% • Debt reduction to improve cash flow 1.91% • Reserves & lifestyle funding 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. 8
Home Equity Contracts Components of Investment Return 17% Gross IRR Structure Gross Contract Gross Contract Investment Investment Returns Returns • The contract structure provides the investor with downside protection and accelerated return participation throughout the life of the contract. • • Results of Results of contract exits contract exits Discount since 2015 since 2015 Non-Correlated Non-Correlated • • • The risk adjustment or discount from the appraised value, is a direct source of return in the early years of the contract. Returns Returns • • Investment Investment Home Price Returns are Returns are Appreciation Capital Gains Capital Gains 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. 9
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 10
Portfolio Characteristics • Average homeowner Average homeowner • equity before Home equity after Home Equity Equity Contract: Contract: 55% 41% HOME HOME Lien Position Contract terms • 1 st 6% 10 year: 88% • 2 nd 84% • • 30 year: 12% 3 rd 10% • EQUITY EQUITY EQUITY • Average home equity contract: $94,500 • Average risk adjusted value: $656,200 • Average appraised home value: $798,100 • Average risk adjustment: 18% • Average contract percentage of equity: 13% CONTRACT Aggregate Mortgage Debt: 351 Contracts $125,500,000 Aggregate Appraised Value: $280,000,000 Average Loan To Value: 45% PORTFOLIO VALUE 11
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 Series B: 1.5% Management Fee Management Fee/Performance 15% Performance Allocation on any return greater than 7% Administrator NAV Consulting Independant 3 rd party- Information available upon Valuation request Legal Counsel Howard & Howard Auditor RSM LP Reporting Monthly Capital Account Statements Custodian for Home Equity Contracts US Bank NA 12
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