Our Investment Platform

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Our Unique Investment Platform

How does Stonegate Global OpenSource work?

The Stonegate OpenSource platform is an off-line and on-line platform that negotiates deals for our Sponsors and Investors.

Once an investment is listed on our simple-to use FundEngine TM, accredited investors can view and invest in real estate and real estate related assets together with our Sponsors and Senior Lenders.  Investors can view simplified information and graphics about vetted real estate projects that we have chosen to offer for investment.  Investors can inspect all investment materials – pitch decks, due diligence information, operating agreements, servicing agreements, private placement memorandums, and more.  Accredited investors can use our platform to help make informed decisions about one of the most powerful wealth creation vehicles in existence.

Who can invest on the Stonegate Global OpenSource platform?

Now only accredited investors can invest in our private offerings.  The most relevant SEC definition of an accredited investor is an individual with at least 1 million in net worth (excluding the value of your primary residence) and/or $200,000 in annual income for the two previous years, with an expectation for the same in the current year.

Why do we partners with Host Brokers on the platform?

We felt that it would be best to make our platform “open source” in order to diversify interests across multiple Sponsors, so that no one sponsors dictates the performance of the platform.  We effectively offer diversification – all with the hopes of protecting investors.  Having an experienced Sponsor with money in the deal that is subordinate to your money is a real advantage for investors.

What sort of process do we go through to vet projects?

Our process is simple, but it is also both qualitative and quantitative.  It involves making sure each operator can delivered quality products to investors and in the past have never had any regulatory issues.

How do I ask a question about a specific investment?

You can email investing@opensourcecap.com.

How is documentation handled on the Stonegate OpenSource platform?

When an investment is initially posted on our platform for review, you will be able to browse the offering documents at that time.

How will I handle the tax accounting once I have made an investment?

All tax and financial information (including the 1099 or K1) is sent to you by email.

What are the tax implications of investing in a dequity mortgage loan?

Dequity mortgage loans are typically structured as debt.  This means that there is typically no tax at the entity level and investors will be distributed their proportionate share of the loan’s gains and losses for tax purposes.  Investors will report these gains and losses on their individual tax returns and will pay tax on items of income and gain according to the character of the income or gain reported on a 1099 form provided by the lender.

We find new real estate projects in the market every day!

As real estate experts in the market, our Host Brokers help investors find new real estate projects to invest in by using “boots on the ground,” together with technology and social media.  We can alert investors of new project proposals within minutes of the project being offered.

We provide our partners prospective deals through our extensive network of relationships with property owners, lenders, consultants, brokers, investment banks, builders and developers.

  • We underwrite, prepare and present investment opportunities
  • We negotiate terms
  • We manage the due diligence process
  • We manage closing and legal documentation
  • We service the asset

Intelligent Investing

The current real estate environment offers unprecedented risk-adjusted returns to investors.  When using a “value added approach,” the profits can be quite rewarding, as many properties are currently priced to allow for new development or repositioning of properties that can be rehabbed.

Our Program

Our program helps investors who target “off market” real estate opportunities.

Our strategy is to help investors build long-term wealth and generate income by investing intelligently with builders and developers that “add value” to a property rather than just speculating on a property’s future value.

Start Investing Now

  • Are you an Investor who wants to increase your deal flow?
  • Are you an investor, interested in real estate investments?
  • Do you live outside the US and want to find deals in the US?
  • Do you want to invest but not sure where to find the best deals?
  • Are you just too busy to own and manage real estate by yourself?

We can help you find a project to invest in and take advantage of special opportunities.

 

Value Added

Renovation-Repositioning-Leasing

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10-18% Annual Return

 

Stabilized

Income Producing – Leasing in Place

sg1

8-10% Annual Return

 

Ground Up Construction Projects

townhouses

Tangible Investments such as affordable homes, apartments, shopping centers, hotels, subdivision lot development,  health care facilities and more

 

 

18-30% Annual Return

 

Why are we different from other crowdfunding platforms?

We focus on real estate investors – providing sophisticated real estate investors access to pre-screened development opportunities sponsored by seasoned companies.

It is our focus on providing value and transparency to investors that makes us so much better.

We let you invest together with other accredited professional investors at the same valuation and under the same economic terms.

Why invest alone when you can invest with professionals?

All of our deals have had to pass the due diligence test of other accredited investors who are putting their money where their mouth is.

Finally, you are investing in real estate projects that will have support, guidance and monitoring from experienced real estate investors who are investing large amounts of money into the deal.

What are the expected benefits?

  • Job Growth.  By expanding opportunities for homebuilders and investors, Open Source Capital serves as a catalyst for local business expansion and job growth.
  • Due Diligence.  All opportunities in our website have passed the detailed due diligence of lead investors who are investing their own money.
  • Better valuations, better returns.  Get the same valuation as lead investors, not the one set by entrepreneurs.
  • Share the risk and the rewards with lead investors.  They lose, you lose. They win, you win.
  • Your rights are protected with complete legal documentation.
  • No legal hassle.  We take care of the legal details for you.

 

We Offer Our Clients 25 Years of Success!

 

Information included in this presentation may contain forward looking information that is subject to certain risks, trends and uncertainties that could cause actual results to differ materially from expected results. Among these risks, trends and uncertainties are a company’s ability to raise capital, risks associated with a particular company’s business plan, national and local economic conditions, including conditions in the real estate and construction industry, conditions and trends in small business investing & lending in general, changes in interest rates and other factors.  This information is not an offer to sell or a solicitation of an offer to buy any securities.  Any such offer will be made only to qualified investors by way of written offering documents meeting the requirements of the Securities Act of 1933, as amended.

 

CONFLICTS OF INTEREST

The Company and Participants are subject to various conflicts of interest arising out of its relationship with the Manager.  These conflicts include, but are not limited to, the following:

  • The Manager receives a transaction Structuring Fee from each Equity Entity.  Additionally, the Manager receives a carried Membership Interest share in the Equity Entity.  The Structuring Fee payable to Managers and the carried Membership Interest was not determined by arm’s-length negotiations.
  • Management may form additional limited liability companies and other entities to engage in activities similar to and with the same investment objectives as the Company. The Managers may be engaged in sponsoring other entities at approximately the same time as the Company’s securities are being offered or its investments are being made.  The Manager may also originate, place, sell and service loans for individuals or unaffiliated entity investors.  These activities may cause conflicts of interest between such activities and the Company and the duties of the Managers concerning such activities and the Company.  Management will attempt to minimize any conflicts of interest that may arise among these various activities.
  • The Manager supervises and controls the business and affairs of the Company, locates investment opportunities for the Company and renders certain other services. The Manager devotes only such time to the Company’s affairs as may be reasonably necessary to conduct its business.  The Managers may be a general partner or manager of partnerships or limited liability companies and other business interests.  See “Management”.

RISK FACTORS

General

 There are significant risk factors associated with a purchase of an Equity Participation.  The following are some of the more common:

  • Your ability to sell or transfer your Participation is limited; no market currently exists, nor is one expected to develop. Securities laws restrictions apply to the Participation Interest.  Proposed transferees of Participation Interest must be Accredited Investors.  Consent of the Management to a transfer is required and may be withheld in the Manager’s discretion.
  • You must place total reliance on the Manager for operating the Company.
  • The Manager is subject to Conflicts of Interest with the Company.
  • Investments in a business loan carry risks; for example, defaults can occur in payments to be made by the Equity Entity.
  • The Equity Participations involve small real estate construction and development. Small construction and development projects are higher risk than other secured transactions.
  • The Company is not assured of obtaining any minimum amount of proceeds from this Offering and this transaction may not proceed.
  • In almost all cases, the Equity Entity uses leverage (borrowed funds) that are senior to the Equity, which increases the Company’s risk in the event of payment default by the Equity Entity. In addition, the rights of the Company and therefore the Participants are subordinate to the rights of the Equity Entity’s senior lenders.

Risks of Small Real Estate Construction and Development Investments

The Company is making small unsecured construction and development equity investments.  Therefore, it is subject to the risks usually associated with real estate investing, such as the following:

  • Return of an equity investment generally is dependent upon the ability of the property to produce cash flow and the ability of the Equity Entity’s ability to repay its senior lender.
  • Some of the factors that may affect the net operating income or value of a property can develop after the Company makes an investment and therefore could not be included in the factors considered in selecting the investment for the Company.
  • Net operating income of the financed project can be volatile and may be insufficient to cover debt service on the Equity Entity at any given time.
  • Net operating income of the Equity Entity and book value of the property may be affected adversely by a large number of factors, such as:
  • design and quality of the property;
  • attractiveness of the property;
  • adequacy of the Equity Entity management;
  • demand for the Equity Entity product or service;
  • general market conditions; or
  • interest rates.

Participating Equity Investments (those which the Company generally makes) are substantially riskier than first mortgage loans because of:

  • Their subordinate position in the event of default;
  • The potential default of a senior loan, which, if not satisfied, could cause the Company to lose its entire Membership Interest investment.

Risks of Default by Equity Entity

 Since a Participant is participating in only a single specific equity investment, defaults by the Equity Entity on its senior financing can have adverse consequences to the Participants, who have no recourse to either the Equity Entity, the Company, or the Manager.  Some examples of things that can cause a loss include the following:
  • The proceeds from sales of foreclosed collateral may be less than the Company’s initial Membership Interest investment;
  • Adverse general and local market conditions;
  • High operating costs and high costs of complying with changes in laws and regulations pertaining to taxes, use, zoning and environmental protection, in each case for indeterminate periods; and
  • Possible liability for injury to persons and property.

Investing in construction transactions is riskier than investing in transactions secured by operating properties or with companies with a long operating history.

No Equity Interest

Your Equity Participation is an investment in the specific Equity Entity only.  You will have no equity interest in the Company.

Risks of Incorrect Original Valuation

 Appraisals are obtained from certified third party appraisers on all transactions.  However, there is a risk that the appraisals prepared by these third parties are incorrect, which could result in defaults and/or losses related to construction/development loans if the amount realized upon a sale of the underlying property turns out to be insufficient to cover the outstanding loan balance.

Because values can quickly decline below their appraised values during the term of the associated Company’s Equity Investment, there is no assurance that the LTV ratios used by the Company will be adequate to protect the Company’s Equity Investment.  Material declines in values could result in the Company’s Equity Investment being under-valued and lost.

Risks Related to Short Term Investments

The Manager intends that the Equity Investments will generally mature within twelve to thirty six months.  For that reason, absent special circumstances, the Manager does not expect to regularly examine the Equity Entity to see if the original appraised values are being maintained.  Instead, it will review an Equity Entity if there is a delinquency on a debt or indication of possible decline in the market value of the investment property. Because the investment may not be monitored as frequently as a longer-term investment would be, the Company may not necessarily be aware of changes in the following factors relating to its investment, which could materially and adversely affect the Company’s results of operations:

  • Physical evaluation of the investment property and area where it is located; and
  • Financial stability of the Equity Entity.

Risks Related to Change in Market Interest Rates

  • It is expected that at least for the foreseeable future the return on an Equity Investment will be structured based on a fixed base rate of return. Market interest rates on investments comparable to the Company’s Equity Investments could materially increase above the general level of the Company’s fixed rate base return rate.
  • Risk related to interest rate shifts increases as the length of maturity of a Company Equity Investment increases.

Risks of Uninsured Losses

  • The Equity Entity will normally carry adequate hazard and liability insurance for the benefit of the Membership Interest of the Equity Entity. Some events are, however, either uninsurable or insurance coverage is economically not practicable.
  • If an Equity Entity allows insurance to lapse, an event of loss could occur before the Company and other Members know of the lapse and have time to obtain insurance to protect their collective interests.
  • Insurance coverage may be inadequate to cover property losses, even though the Equity Entity purchases insurance that it believes is adequate.

Risks of Lack of Control of Company

Management consequently has the sole power to:

  • Control the Company and its operations;
  • Control the allocation of revenue related to loan pricing and operating expenses;
  • Dissolve the Company;
  • Change the nature of the Company’s business;
  • Amend the Operating Agreement of the Company;
  • Remove and replace the Managers; or
  • Approve a merger or sale of all or substantially all of the assets of the Company.

Risks of Default by Equity Entity and Real Estate Ownership after Foreclosures

A default by an Equity Entity can have adverse consequences to the asset value and expected income.  Examples of these are the following:

  • Operation of foreclosed properties may require the investors to spend substantial funds for an extended period;
  • Subsequent income and capital appreciation from the foreclosed properties may be insufficient to meet any remaining expenses or surviving debt service;
  • The proceeds from sales of foreclosed properties may be less than the Company’s initial Membership Interest investment in the Equity Entity;
  • Adverse general and local market conditions;
  • High operating costs and high costs of complying with changes in laws and regulations pertaining to taxes, use, zoning and environmental protection, in each case for indeterminate periods; and
  • Possible liability for injury to persons and property.

Hazardous or Toxic Substance Risks

Various federal, state and local laws can impose liability on owners, operators, and sometimes lenders for the cost of removal or remediation of certain hazardous or toxic substances on property.  Such laws often impose liability whether or not the person knew of, or was responsible for, the presence of the substances.

When the Company obtains a Membership Interest in the Equity Entity, it becomes an owner of the Equity Entity property.  As an owner, the Members, under some circumstances, could become liable for remediating any hazardous or toxic contamination, which costs could exceed the value of the property and Membership investment.  Other costs or liabilities that could result include the following:

  • Damages to third parties or a subsequent purchaser of the property;
  • Loss of revenues during remediation;
  • Loss of tenants and rental revenues;
  • Payment for clean up;
  • Substantial reduction in value of the property;
  • Inability to sell the property; or
  • Default by a borrower if it must pay for remediation.

Any of these could create a material adverse effect on a foreclosed asset and/or transaction profitability.

THE EQUITY PARTICIPATION INTERESTS ARE TIED TO THE PERFORMANCE OF A SPECIFIC INVESTMENT IN AN EQUITY ENTITY. THE COMPANY WILL SELL EQUITY PARTICIPATION INTERESTS FOR EACH MEMBERSHIP INTEREST IN AN EQUITY ENTITY THAT IS BEING ACQUIRED. THE RETURN OF EACH MEMBERSHIP INTEREST INVESTMENT IS DEPENDENT FOR PAYMENT ON PERFORMANCE OF THE CORRESPONDING EQUITY ENTITY. THESE MEMBERSHIP INTERESTS ARE UNSECURED INVESTMENTS. INVESTING IN THE EQUITY PARTICIPATIONS SHOULD ONLY BE CONSIDERED BY PERSONS WHO CAN AFFORD THE LOSS OF THEIR ENTIRE INVESTMENT.

Investment Objectives

The Company’s objectives are:

  • To maximize cash flow and pay Distributable Amounts to the Participants; and
  • To preserve, protect and return a Participant’s investment.
 INVESTOR SUITABILITY STANDARDS

You must be an “Accredited Investor” to purchase an Equity Participation.  In addition, the Company has restrictions on the resale or transfer of a Participation Interest.  A Participant must review the Subscription Agreement (Exhibit D) prior to executing it, and will be deemed to have made representations as to being an Accredited Investor.

The Manager reviews and screens all Subscription Agreements, and rejects Subscription Agreements from investors not meeting the criteria.

The Company cannot accept subscriptions from any person or entity where the representations required are either not provided or are provided but inconsistent with the determination that the subscriber is accredited.  The Manager has the unconditional right to accept, or reject, any subscription in whole or in part for any reason, or no reason.

A Participation Interest represents an investment with limited liquidity.  You may not be able to liquidate your investment in the event of an emergency or for any other reason.  A Participation Interest will be sold to a Participant only if the Participant is an Accredited Investor as defined in the Subscription Agreement.

You may transfer your Participation Interest only to persons who are Accredited Investors and only with the consent of the Manager.  A Participant must carefully read the requirements in connection with a re-sale in the “No Sale or Transfer of Interests” of the Subscription Agreement.

Due to the nature of the Participation Interest, it is likely that all of the income attributable to the return on a Participation Interest will be miscellaneous income taxed at ordinary income tax rates.

You should obtain the advice of your attorney, tax advisor, and/or business with respect to the legal, tax and business aspects of this investment prior to subscribing for a Participation Interest.

ASSIGNMENT AND TRANSFER OF AN EQUITY PARTICIPATION

There is no public market for the Equity Participations and none is expected in the future.  Participants have only a restricted and limited right to assign their Equity Participations.  Holders may transfer their Equity Participations only by written instrument satisfactory in form and substance to the Manager and only to an Accredited Investor.  You may make no transfer of an Equity Participation or a fractional Participation, and no transfer in the absence of consent of the Manager (other than a Participant transferring all of his or her Participation by operation of law).  Any transfer must comply with then-current laws, rules and regulations of any applicable governmental authority.