Calvera Income and Growth Fund –
Common Questions and Answers

Only persons who are "accredited investors" as defined in Regulation D under the Securities Act of 1933, as amended, and in reliance on Rule 506(c). The General Partner will require independent verification of each investor’s status as an “accredited investor” pursuant to the procedures adopted by the General Partner.

We believe that an investment in the Fund might be beneficial to an investor seeking 1) to diversify an investment portfolio with a real estate investment vehicle focused primarily on multifamily real estate, 2) to receive current income, 3) to preserve capital, and 4) who is able to hold an investment for a period of time consistent with the General Partner’s redemption program and liquidity strategy.  Potential investors who require immediate liquidity or guaranteed income, or who seek a short investment, are cautioned that an investment in the Fund will not meet those needs.  In addition, the Fund should not be considered a complete investment program.

You may express interest in subscribing to this offering by providing the information requested here and a member of our team will reach out to discuss the Fund.  The General Partner may reject all or any portion of an investor’s Subscription amount.  If accepted, an investor's Subscription Agreement will be effective as of the date of acceptance.  Fund interests will be issued to investors at the time of drawdown of their capital commitments.  Interests issued after the initial closing will have purchase prices based on the Net Asset Value (“NAV”) of the Fund as of the close of business on the day immediately preceding the applicable draw down date.  NAV is defined as the aggregate value of the Fund’s proportionate share of the Fund’s investments, plus (ii) all other assets of the Fund, minus (iii) the Fund’s indebtedness and other outstanding balance sheet obligations.

Generally, yes.  With respect to a self-directed IRA, it will depend on your custodian’s processes and procedures so please inquire of your current custodian whether they can work with the Fund’s requirements. 

The General Partner will prepare and distribute electronically, on at least a quarterly basis, unaudited reports of the Fund’s performance.  Limited Partners will also receive, or be provided electronic access to, annual financial statements audited by the Fund’s independent accountants.  Financial and other important information will be accessible on the General Partner’s investor portal.

Each Limited Partner’s share of the Fund’s income, gain, losses, deductions, and credits will be reported on an Internal Revenue Service Schedule K-1.  Although the General Partner’s goal is to finalize Schedules K-1 by March 15th of each year, the General Partner may be dependent upon outside reporting, or require additional time to furnish the forms, in which case Limited Partners may be required to obtain extensions of the filing date for their income tax returns at the U.S. federal, state and local levels. for filing federal, state, and local tax returns.

Available cash of the Fund may, in the General Partner’s sole discretion, be used to satisfy redemption requests, after payment of, and setting aside reserves for, current distributions, working capital, fees, expenses and additional investments.  In addition, redemptions will be subject to the following terms and conditions: 

• Lock-up.  3 years from the date of the applicable closing of a Limited Partner’s capital commitment. This compares with traditional closed-end fund vehicles that typically have no redemption rights and lock-up investor capital for 5 to 10+ years. 
• Minimum Redemption Amount.  $50,000 per redemption request (or if lower, the Limited Partner’s entire remaining Interest in the Fund), although lesser amounts may be permitted by the General Partner. 
• Notice.  90 days’ prior written notice before being entered into the Redemption Queue (as defined below). 
• Redemption Price.  NAV as of the date on which the General Partner satisfies the applicable redemption request, generally expected to be the last day of a calendar quarter (each such date, a “Redemption Date”), taking into account any taxes, fees, expenses and incentive allocation (as explained below).
  

The “Key Fund Terms – Redemptions” section of the Memorandum describes the priority of redemption requests, certain limitations on redemptions, holdback rights, and certain other details on the mechanics of redemption requests. Investors should review the Offering Documents in conjunction with their review of this FAQ. 

The Fund may make distributions at such times and in such amounts as the General Partner determines in its sole discretion; provided, however, that to the extent cash is available, the General Partner will target quarterly distributions within 45 days after the last day of each calendar quarter to each Limited Partner of approximately 4% to 6% per annum of the NAV of such Limited Partner’s interests.  The target distribution rate may be lower than such target, especially during any ramp up period as it seeks to deploy capital.  To the extent that The Fund has earned profits and related cash flow in excess of this amount, the intention is to generally retain the profit inside the Fund.  As a result, such profit will be intended to be reflected as an increase in the NAV.  Limited partners may also elect to have the Fund reinvest their current distributions pursuant to a distribution reinvestment program, as further described below.

Limited Partners may elect on an annual basis to have the Fund reinvest their current distributions in additional interests in the Fund under a distribution reinvestment program (“DRIP”).  The value for any interests in the Fund acquired under the DRIP will be based on the Fund’s NAV as of the distribution date.  Limited Partners that make the DRIP election will not receive cash distributions, but will be deemed to have received distributions of the amount reinvested in the Fund and deemed to have made a corresponding capital contribution.  As a result, such Limited Partners may have a tax liability with respect to their deemed distributions, but will not receive cash distributions to pay such liability.  The General Partner may suspend the DRIP in its sole discretion.

• Directly or indirectly combines the capital of many Limited Partners to acquire or provide financing for real estate assets.
• Owns investments in real estate and real estate-related assets in a professionally managed portfolio.
• Satisfies the various requirements of the Internal Revenue Code of 1986, as amended (the “Code”), including a requirement to distribute to stockholders at least 90% of its REIT taxable income each year, and
• It is generally not subject to U.S. Federal corporate income taxes on its net taxable income that it currently distributes to its stockholders.

The potential benefits to Limited Partners of using the REIT structure are expected to be as follows:

• Limited Partners in the Fund do not have to file a tax return with respect to income to the property of the REIT in each state where property is owned, unlike most other funds;
• Non-corporate Limited Partners in the Fund receive a 20% deduction on REIT dividends versus no discount on Qualified Business Income in other funds (which benefit is expected to end December 31, 2025);
• The REIT carries forward Net Operating Losses (i.e., when a Fund’s allowable deductions exceed its taxable income within a tax period, which can generally be used to offset a Fund’s tax payments in other tax periods through what is called a loss carry forward) for Limited Partners in the Fund while Limited Partners in other funds must track their own Net Operating Loss carry forward if unused in that tax year;
• Limited Partners in the Fund should not receive unrelated business taxable income (“UBTI”) to the extent investments are made through a REIT structure.There is a low likelihood that investments would be made outside of a REIT structure, in which case Limited Partners, as would Limited Partners in other funds without a REIT structure, could be subject to UBTI.
• Allows for numerous exit options (i.e., the ability to go public, sell in bulk to a larger REIT or institution, keep growing and acquire another REIT) whereas most other funds often must selleach property individually subjecting investors to capital gains taxes; and

In general, an REIT does not have any incentive to take bonus depreciation to generate oversized taxable losses and the losses of the REIT do not pass through to the investors. However, the General Partner has found that many investors are unable to fully optimise the larger taxable losses given limited exposure to real estate and/or the inability to apply these taxable losses to other taxable income. The foregoing differences are not exclusive and other differences to the investors of investing in an REIT versus a partnership may exist.

The main difference between a private and a public REIT is liquidity. Public REITs are traded on exchanges and are priced fluidly throughout the day. An investor in a public REIT can move in and out of that stock as they see fit. Additionally, a public REIT will provide an investor with a 1099 to account for the quarterly dividends. Public REITs are also subject to analyst pressure and achieving short-term earnings targets.

A private REIT does not trade on an exchange and cannot be bought and sold with similar ease. Private REITs may value themselves on a monthly or quarterly basis as new investors come in and current investors seek to redeem their position. The methodical valuation process tends to smooth out changes in value unlike a public REIT where there can be more price volatility.

While private REITs are not immune to the overall economy and whims of the stock market, public REITs are more closely tied to the broader stock market. As a result, there are times where public REITs may be overvalued relative to its underlying property value and times where it may be undervalued. Private REIT valuations seek to show the current market value of its underlying assets more accurately.The General Partner believes the pressure that public REITs have to meet short-term Wall Street goals can negatively impact a long-term strategy. In addition, private REITs allow quality real estate managers to implement a long-term vision without being second-guessed in the short-term, hopefully allowing one to generate superior returns for investors.

The vintage of properties acquired within the Fund's target markets will vary by market, but generally, Calvera intends to target properties built in the year 2000 or later to account for the widening functional obsolescence gap between older and newer vintage properties, the long-term value dynamics of which the General Partner believes will favor newer vintage properties or properties built prior to the year 2000 when such functional obsolescence gap is not as significant. In addition, the General Partner believes this average vintage will allow for a renovation program that can be largely focused on high-value/ROI upgrades such as technology packages, sustainability improvements, and minor interior renovations. Thus, the General Partner intends to continue to do what has brought Calvera success in the past: acquire properties at a competitive basis, make operational improvements, and creatively rebrand with targeted renovations. We do not intend to change this process in this Fund. In fact, the General Partner might take it one step further by creating a common brand amongst all portfolio properties once a critical mass is reached and by implementing technological upgrades to meet the demands of the modern renter. This is expected to still allow for affordable rents relative to new construction (developments of which are requiring increasingly higher rents to keep up with rising construction costs).

Data driven insights inform all aspects of the General Partner’s investment process, and their in-house market research identifies the most attractive metros and submarkets for growth.  We believe many of these markets have strong technology and/or healthcare employment bases, and exhibit improving economic, demographic, and real estate market trends.  The General Partner will initially consider potential opportunities located in Austin, Charlotte, Dallas-Fort Worth, Denver, the Greater Phoenix Area, Nashville, Raleigh/Durham, and Salt Lake City.  Additional regions will be qualified on an opportunistic basis by the General Partner to the extent they exhibit some or all of the following characteristics:  (1) desirable urban amenities, (2) job and population growth, (3) established or emerging technology and/or healthcare employment bases, (4) highly educated workforces, and (5) a favorable business climate.

The Fund is structured as an evergreen investment vehicle, which means that it can stay open and hold assets for an indefinite period of time.  Having a perpetual term eliminates the Fund’s need to establish a predetermined liquidity event for the underlying properties and can thus take a long-term view when selecting investment opportunities.  This potentially endless investment horizon fosters acquisition and management decisions based on long-term growth and profitability.   The General Partner believes that holding target assets for a long period of time will generally fulfill the Fund’s objective by generating long-term cash flow and NAV growth.   

The Fund intends for all of its investments to generate income.  Although the Fund intends to hold its target assets for lengthy periods of time, the Fund’s investment strategy also includes the strategic disposition of assets in its portfolio.  When determining whether to sell a particular asset, the General Partner will generally evaluate whether the asset is in an appropriate condition for sale, review the market conditions to confirm they are favorable to a sale, assess whether the returns from the sale of such asset will deliver proceeds consistent with the Fund’s objective, and confirm the sale satisfies the investment plan established at the asset’s acquisition.  The General Partner intends to reinvest proceeds from the sale of investments through the use of Code Section 1031 (“1031 Exchange”) or other like-kind exchange or non-recognition transactions where the Limited Partners may defer recognition of capital gains and related federal income tax liability.  

Any information provided in this FAQ is based on our understanding of current tax law.  You are strongly urged to consult your tax advisors prior to investing in the Fund as to, among other things, the advisability of investing in the Fund, the tax consequences of any such investment, and the tax treatment of the Fund’s investment strategy. Calvera disclaims all responsibility for any tax treatment or tax consequences. Calvera is not responsible for updating any information contained herein based on changes in law or interpretation after the date hereof.