Tempo Growth Fund II LLC
Tempo Growth Fund II LLC Overview
- Fund target capital: $25,000,000
- Management: TF Management Group LLC
- Target Returns:
- Class A 13%-17%
- Class B 12%-20%
- Unit Classes:
- Class A1, B1 units: $1,000,000+
- Class A2, B2 units: $500,000 – $999,999
- Class A3, B3 units: $100,000 – $499,999
- Performance Split (after Pref and Return of capital):
- Class A1, B1 units: 80% / 20% split
- Class A2, B2 units: 70% / 30% split
- Class A3, B3 units: 60% / 40% split
- 5-7 year term
- IRA Friendly
- Areas of investment include Distressed Commercial Real Estate debt & Value-add investments (Self-storage, Multifamily, etc.)
- 12 month fundraising period (two extensions of 6 months each are allowed)
Tax efficiency – Class B Membership Units receive large depreciation benefits, and most of the income comes as capital gains.
Many investors have leveraged the Class A Membership Units in Tempo Growth Fund II, LLC to take advantage of the tax savings when converting their IRA to ROTH IRA.
- Class A (Preferred Equity): No losses, stable capital account balances.
- Class B (Common Equity): Receives losses from operations and depreciation, mainly in K-1 box 2.
- If you’re not a real estate professional, losses in boxes 1 and 2 offset passive income only.
- These losses do not reduce taxes on non-passive income like capital gains, wages, or business income unless you are considered to be a real estate professional.
TF Management Group LLC does not provide tax advice. Please consult with your CPA for personalized guidance on your tax situation.
Pros & Cons of tempo growth fund II llc
- Class A Preferred units 12% pref return
- Class B Common 8% units pref return + Depreciation
- Institution-level Preferred Return and Split
- Target annual ROI for Class A Preferred units 13-17%
- Target annual ROI for Class B Common units 12-20%
- Tax Efficient: Depreciation tax benefits and Capital gains focused
- Potential for strong return based on value-add and exemplary management, strong sponsors/projects
- IRA Friendly – we plan no-leverage on the Fund level
- No cash distributions in the early years, e.g. 1-2 years
- No liquidity (capital invested in long-term projects)
- No re-investment of distributions
- Fund is projected to take 5-7 years (may be longer) complete life cycle of all investments
- Not all “committed” capital may go to work immediately
Tempo Growth Fund II LLC planned areas of investment
Distressed Commercial Debt
- Quadrant 2 deals with good downside protection, but no initial cashflow
- Collect late fees and default interest (18-24% rate)
- Foreclose if needed. Usually, get repaid within 1-2 years as borrower finds money to repay
Self-Storage value-add deals
- Conversions from retail, industrial or other to Self-Storage
- Ground up construction
- Quadrant 4 deals typically, but could be some Q2 deals
Multi-family value-add deals
- Quadrant 2 deals typically, sometimes Quadrant 4
- Moderate to heavy value-add work
- Renovations 1-2 years with no / limited cashflow
- Exit strategy:
- Stabilization and refi in year 3, and then cashflow, or
- Sale upon stabilization
Industrial, Office and other value-add deal
- Q2 or Q4 deals (TBD)
- Execute Value-add plan and then refi (return capital) or resell
Investment Objective and Strategy
The Manager’s strategy is to acquire growth-focused real estate-based investments in various forms, including equity securities in other 506 Regulation D funds or intermediary entities that own interests in real property or debt instruments secured by real property, and direct investments in real property or debt instruments secured by real property (each an “Asset”). The Manager will acquire Assets whose underlying real estate-based assets are located in target markets across the United States and have a value-add strategy, producing little to no upfront income until value-add work is completed and stabilization is achieved.
The Fund intends to invest primarily in entities, funds, and direct investments managed by Fairway America, LLC, Vivo Investment Group, Goodman Capital LLC, and Pepper-Pike Capital Partners (collectively, “Strategic Partners”), as well as other selected funds and syndications. The Principals have extensive experience investing with the Strategic Partners and believe they can use that experience to produce attractive returns for Fund investors. The Fund may invest in entities and funds managed by other parties (“Sponsors”), in the Manager’s sole discretion. The Manager intends to identify Sponsors that are high quality real estate deal syndicators and originators, and fund managers, with demonstrable character, integrity, track records, and managerial capabilities in their particular geographic area and real estate-based asset type niche.
By investing in individual deals or funds through the Strategic Partners and other high-quality Sponsors, and by diversifying the Fund’s holdings over a variety of investments with varying real estate asset-based investment strategies and widespread geographic territories, the Manager believes it can produce superior risk-adjusted returns for the Fund.
The Manager and its members may be members or general partners of other entities which have investment objectives that have some similarities to the Fund, which may cause the Manager’s members to pursue investments that are competitive with those of the Fund. While the Manager intends to pursue such investment opportunities outside the Fund primarily when the particular asset does not fully match the Fund’s investment strategy or when the Fund is unable to pursue the asset due to capital restraints or other concerns, the Manager retains discretion to pursue assets outside the Fund. The decision as to the suitability of any investment by the Fund will be determined by the Manager in its sole discretion and will be based upon a review of the Fund’s investment portfolio and upon factors including but not limited to asset allocation, investment size, net income, the effect of the investment on diversification of the Fund’s portfolio, and the amount of Fund capital then available for investment. Notwithstanding the Manager’s broad discretion, the Manager intends primarily to pursue all investments that are in alignment with the Fund’s objectives through the Fund, and not through other entities.
Asset Selection Criteria
The Fund expects to acquire Assets that meet the following selection criteria, as determined by the Manager in its sole discretion:
- Primarily entities and funds managed by Fairway America, LLC, but the Fund may also invest in entities and funds managed by other Sponsors, at the sole discretion of the Manager
- Underlying real estate-based assets that have a growth-focused value-add strategy with little to no up-front income
- Underlying real estate-based assets may include real property and/or debt instruments secured by real property
- Various asset classes, including but not limited to self-storage, retail, multifamily, office, and industrial
- The acquisition price for each Asset will typically range from $500,000 to $2,000,000
- Total capitalization of underlying real estate-based assets (including debt and equity) typically ranging from $2,000,000 to $20,000,000
- Typical hold periods for underlying real estate-based assets of six to nine years