CommonWealth Capital Advisors - Architects of Finance

Dear Fellow Entrepreneur,

Thank you for the opportunity to present our capital-raising services, specifically to create and manage one or a series of Private Real Estate Funds/Projects, Real Estate Investment Trusts –“REITs” or Tenants in Common 1031 Exchange Entities – “TICs”. Please take a few minutes to read this letter thoroughly, as it outlines the most successful ways to raise capital for privately held R E Funds/Projects, REITs or TICs, whether you wish to stay private or go public. This letter explains, in a very basic way, how we assist start-up and early-stage R E Funds/Projects, REITs/TICs in raising substantial amounts of capital using the techniques of Wall Street investment banks.

Most of our clients have enjoyed success as real estate developers, real estate agents, property management companies and managers of projects capitalized with their own money and limited outside investor funds. Many see a need to re-organize their financial and operational structures as the administrative burdens of managing multiple projects with differing sets of investors are becoming too complicated. Most have now come to the juncture where their track records are very good, and they have earned the right to manage large pools of assets - cash and property with full discretionary authority.

Most start-up or early stage REITs organize and capitalize a Management Company first. Some may elect to keep their current real estate development company or property management firm intact and use current cash flow and or capital to start this process. Others elect to start fresh and form a new company to specifically become the management company. The decision on which course to choose is generally based on a handful of factors. The primary factor being the ability to either fund internally - one would keep the existing company and evolve it or the need to fund from investors known personally - one could offer participating preferred shares (or units for an LLC) that are callable and or convertible into the management company's common shares (or units for an LLC) at a later date..

For most start-up or early stage REIT management companies, it makes sense to start with a Private Real Estate Fund as an LLC and grow its investor base to 100 or more before registering as an actual REIT. This is done, because REITs technically need to be formed as a corporation (it is easy to convert an LLC into a corp.), have at least 100 investors (with no one investor owning more than 9.9% (the 5-50 test) and then file Form 1120 with the IRS to avoid the double taxation of a corporation. Whether your fund remains private as a FUND or you choose to go public as a REIT, we'll continue to use the term REIT to include both types of Real Estate Funds for simplicity's sake.

Once the REIT has been formed, the management company may then contract with each REIT that it creates, to manage the assets of the REIT(s). Generally, raising $500,000 to $1,000,000 in seed capital for the Management Company is sufficient to market and sell the shares of a REIT or two. The seed capital amount is normally dependent on the size of the REIT (s) and should represent no less than 2% of the REIT s' proposed raise. Need $200,000,000 for your REIT? Consider raising $5,000,000 in seed capital for the Management Company. The Management Company then "Lends" the REIT a portion of the seed capital, to enable the REIT to establish itself as an entity that can qualify for raising capital through the issuance of securities. The Management Company contracts with the REIT(s) for an annual Management Fee of 1% to 3%, with a percentage share in the gross income and net capital gains from portfolio properties, as well as, a real estate brokerage commission, if the Management Company is a licensed real estate brokerage firm.. Once the REIT is capitalized, the Management Company is paid back the loan plus any accrued Fees it may incur.

The true value of a "Tenants In Common" (TIC) deal structure is the availability of the 1031 Tax Deferred Exchange. The 1031 Tax Deferred Exchange holds up if 1.) One property is registered as Tenants In Common; and 2.) That property is held by one entity, regardless if owned by one investor or a pool of investors. Although the interests and distributions are prorated to capital contribution amounts of each investor, the property registered as Tenants In Common is treated as held by one entity for tax purposes, including the 1031 Tax Deferred Exchange. In addition, TICs are professionally managed, generally by a Property or Real Estate Management Company.

A pool of properties on the other hand, such as a REIT or Real Estate Fund, will not qualify for the 1031 Tax Deferred Exchange, but using the Financial Architect System™ REIT Producer™ will work like a charm for producing TIC Investment Deals, as long as one uses either the Growth or Income REIT Template to purchase only One (1) property and register each share or interest-holder as "Tenants In Common." The Management Company Templates will work like a charm as well, as most entrepreneurs will invariably need to form and or capitalize a Management Company to handle the volume of administrative work that will be involved in managing "One Property Portfolios" or TICs.

So, if you have a serious interest in building one or a portfolio of TICs to manage, we suggest you purchase and slightly modify the REIT Producer™ to build the required securities offering documents needed to pool investor capital.

As former Wall Street financiers, we have many capital sources looking to fund "Quality Deal Flow", primarily investment banks - broker dealers, angel groups, hedge funds and private equity firms. Our job is to create and supply that Quality Deal Flow. If you believe your REIT(s) can become that Quality Deal Flow, then we are interested in discussing a relationship further.

Suffice it to say, there is an unlimited number of ways to seek capital. However, there are only a few ways to capitalize a Private Real Estate Fund and or a REIT with substantial amounts of capital, while maintaining the vast majority of common equity ownership and voting control of the management company of the REIT, as well as, management control over one or a series of REITs.

Clearly, we cannot design or illustrate an optimum capitalization plan for your REIT(s) in a dissertation on a website; however, whether you have been through the capital raising process or not, we are sure that you will appreciate our process.

If you have not been through the capitalization process before, or even if you have, we're sure you will appreciate reading: "The Secrets of Wall Street - Raising Capital for Start-Up and Early Stage Companies."

When it comes to raising capital, there is no simpler way to explain how to effectively raise substantial amounts of capital while maintaining voting control. If you read just the first 2-Chapters of the EBook, it would be time well spent. By doing, so you will be able to make an informed decision if our process is right for your company's capital raising needs. At a minimum, you will save a significant amount of time and money.

The fee structure to the management company for managing the REIT can be a combination of any number of various factors, but the industry norm is as previously mentioned.

When organizing the REITs one should be mindful of industry norms to increase the probability of current capital attainment, as well as setting up each in light of becoming the "Quality Deal Flow" that Wall Street seeks. Separating the types of properties (Income vs. Growth) into specific types of REITs is also an industry norm.

Sound Complicated?
Not with REIT Producer™.

• To Save You The Maximum Amount Of Money, we suggest you start your capital-raising efforts with our software. REIT Producer™ is a meticulously complete system utilizing 100% of CCA’s Investment Banking Advisory Process. However, if you need additional assistance, it can be provided through the "Document Review and Completion Option" as stated within the Financial Architect® End-User Instructions.
• To Save You The Maximum Amount Of Time, we suggest our full service Investment Banking Advisory Services. Through this service, we offer speed and accuracy. The range of progressive and contingent fees are customized according to the quantity of the required capital sought and the processes involved.
• Do you already have a Private Placement Memorandum (PPM) but no Investors? If you have been sending out your securities offering documents (PPMs) but are not attracting investors, there may 3 basic reasons why. 1.) The deal structure has too much dilution for attracting investors; 2.) The effort is not set-up as an ongoing well orchestrated process; and 3.) You may not be targeting enough investors that have expressed an interest in your type of offering. These issues, and many more, can easily solved with REIT Producer™.

When making a competitive analysis of our Investment Banking Advisory Services, please be sure to: (a) price the cost of producing pro forma financial projection that are GAAP Compliant; (b) price the cost of producing a marketable deal structure; and (c) price the cost of producing either a Regulation D 506, SCOR, Regulation A/CA(1001) or SB-2 securities offering document.

CORE COMPETENCIES

	Commonwealth Capital Advisors	Accountant	Investment Banker	Attorney	Stockbroker
Produces Pro Forma Financial Projections	Yes	Yes	No	No	No
Analyzes & Determine Company's Valuation	Yes	Yes	Yes	No	No
Establishes Price Of Company's Securities	Yes	No	Yes	No	No
Structures The Capitalization Plan	Yes	No	Yes	No	No
Tailors Securities Offering To Meet Market Demand	Yes	No	Yes	No	No
Produces Securities Offering Document Compliant With Regulations *	Yes	No	No	Yes	No
Manages Administrative Compliance After Issuance Of Securities	Yes	No	No	Yes	No
Manages Capital Raising Process **	Yes	No	No	No	Yes

* Commonwealth Capital Advisors, LLC does not practice law, but it will assist its clients in managing the legal process with the clients’ legal counsel. Securities Offering Documents are prepared for legal counsel review.

** Commonwealth Capital Advisors, LLC does not solicit or sell securities for its clients, but it will assist its clients in managing the capital raising process by assisting in the marketing effort and training bona fide employees of the client firm.

When taking a company or REIT public, we outsource all legal and accounting (audit) work to qualified securities counsel and SEC compliant accounting firms. We engage in underwriting negotiations with SEC registered broker dealers as lead negotiator. We administer and pay for the entire process, as part of our listed fee.

Our fiduciary duty is always with our client firms.

In regards to our Investment Banking Advisory Services, we have designed our contingency fee schedule, so we are equally committed with our client firms to a successful capital-raising effort. Our client firms make progressive payments as we perform certain securities offering document production, filing and securities sales training functions and as they raise the capital. Although we cannot take a commission from the sale of securities, our profits from securities offering document production and advisory fees are dependent upon the successful capital raising efforts of our client firms. Our "real" money is made when we take a REIT public. By assisting you in maintaining the vast majority of common equity ownership and voting control of the Management Company, throughout the entire capitalization process, we earn stock, a 3 to 5% fully diluted equity stake in the Management Company, once we take your first REIT public.

We can help your Management Company raise as much capital as necessary for one or more REITs on an "as needed" basis. You may choose to do this through a series of securities offerings to support the creation and operation of an "in-house" Finance Department. Whether privately or publicly held, we can assist your Management Company with the creation and marketing of "in-demand" securities to raise capital.

Clients of Wall Street investment banks use this process. It is a logical progression of steps to ensure that you always maintain a relative position of strength when competing for capital, as well as, the vast majority of equity ownership and voting control. These are the precious elements that most business owners give up too early in the capital raising process. We can cite case study, after case study, of entrepreneurs who have successfully raised capital using various parts of this process because these are the same fundamental processes used on Wall Street. Their successes will not necessarily equate to your success, because without your belief in the logic of the process, dedication and commitment to the effort, the case studies are moot.

If you choose us to represent your Management Company as its Financial Advisor, we will engineer a capitalization plan and a series of securities offerings with marketable deal structures that will give your Management Company and its REIT(s) the highest probability of capital attainment possible. How can we make such a claim? Because our process is simply the Wall Street process, re-engineered for Main Street companies.

In addition, if you need an SEC Registered/NASD Member Broker-Dealer to sell your REIT's securities for you, we can assist you by sponsoring your REIT at the next National Investment Bankers Quarterly Capital Conference.

Our seasoned experts offer in-depth experience in business organization, deal structuring, securities offering document production, and capital procurement through the issuance of securities, matching the needs of any business structure in any sector.

We look forward to serving your Management Company as Financial Advisor. If you have an interest in executing our Investment Banking Advisory Services ("IBAS") Agreement, please email us at support@commonwealthcapital.com to set a mutually convenient time for a conference call.