Hybrid Debt Fund makes first-position loans to commercial developers. These loans are fixed-rate, 3-year terms, and include a 30–35% share of project upside (cash flow + capital gains).
Loans are secured by a first deed of trust with foreclosure rights. The fund underwrites conservatively at ≤80% loan-to-value and maintains loan loss reserves.
Investors receive a 5.5% preferred return paid quarterly, plus 30–35% of upside upon project exit. Target net returns are 11–13% IRR.
Minimum investment is $100,000. The fund is closed-end with a 5-year lockup. Capital is drawn down as needed, and early redemptions incur a penalty.
There is a 2% management fee, origination fees, and a profit split: 80/20 in favor of the investor until 13% IRR, then 50/50. All returns are quoted net of fees.
The fund is led by David Kotter and team, with over 21 years of experience and $2.1B+ in closed commercial real estate deals.
Investments include multifamily, industrial, retail, medical office, and storage properties—typically in high-growth, business-friendly U.S. markets.
Deals are sourced through trusted broker and banker relationships. Borrowers must meet strong credit profiles, and all deals go through a stress-tested underwriting and credit committee review process. Typical timeline: 45–60 days.
Risks include interest rate volatility, construction delays, sponsor issues, and macroeconomic shifts. Mitigated through strict underwriting, borrower guarantees, reserves, and conservative structuring.
Fund managers co-invest their own capital. Compensation is performance-based, and advisors provide oversight. Investors receive transparent, quarterly updates.
The HDF is structured as a Reg D 506(c) fund with a Delaware LP and institutional-grade documentation. Family offices may invest through LLCs, LPs, trusts, private foundations, or international entities. We provide entity-specific subscription documents and collaborate directly with your legal and tax advisors to ensure compliance with governance protocols and capital allocation policies.
What is the risk profile of the underlying credit assets, and how do you mitigate downside exposure?
We originate and underwrite senior-secured commercial real estate loans across income-generating asset classes. All loans are backed by first-lien positions, with conservative loan-to-value ratios (typically sub-80%) and personal guarantees in select cases. Our credit committee emphasizes cash-flow predictability, sponsor experience, and exit clarity. We’ve had zero capital losses to date and actively manage risk through covenant oversight and asset-level reporting.
The fund targets an 11 to 13% Net IRR, and a 5.5% paid quarterly, with optional reinvestment. Yield is driven by contractual interest payments from borrowers with fixed-rate structures, providing stable, predictable income. We aim to provide both cash flow and principal stability, aligning with family office allocation mandates.
We issue investor-specific K-1s by March 15 and offer CPA support for efficient filing. The fund is structured to avoid UBIT for most tax-exempt and IRA-based entities by utilizing blocker corporations where appropriate. We also work with your tax advisors to align reporting with your unique structure — including foundations, DAFs, or offshore entities — to reduce friction and enhance after-tax returns.
Currently, the investment generates ordinary income for the client. However, we are actively developing a structure that will allow clients to elect capital gains treatment, which may offer tax advantages depending on the investor’s specific situation.
The target return is a net IRR of 11% to 13%. Investors receive a current return of 5.5% annualized, distributed on a quarterly basis. In addition, there is upside equity participation that is realized toward the end of the underlying loan cycle.
The minimum investment is $100,000, and all investors must meet the criteria of an accredited investor as defined by the SEC. There are no additional eligibility requirements beyond accreditation at this time.
The investment has a 5-year hold period, followed by a 2-year sunset window for wind-down and capital return. There are no standard redemption options during the term. However, early withdrawal is permitted with a 3% penalty on the proceeds, which is paid to the Fund.
The fund lends against Multifamily, Industrial, Storage, and Strategic Retail properties. We focus on asset classes with strong fundamentals and demand drivers, targeting both value-add and stabilized properties. Our rigorous due diligence process emphasizes high-quality borrowers, prime locations, and superior real estate metrics.
Key risks include interest rate fluctuations, construction delays, sponsor execution failure, and macroeconomic shifts. These are mitigated through deep underwriting, rigorous due diligence, experienced leadership, data-driven decision making, and adequate reserves.
We provide quarterly fund updates with a commitment to transparent, timely, and professional reporting, giving both RIAs and clients the information they need to remain confident and informed.
Asset Management Fee: 2% annually, paid monthly, based on net AUM
Early Withdrawal Fee: 3% of proceeds
Transfer Fee: $1,000 minimum administrative fee for interest transfers
Performance Participation: 80% of profits to the investor up to a 13% IRR; above that, a 50/50 split with the Manager
Returns are presented net to the investor.
Early Withdrawal Fee: 3% of proceeds
Transfer Fee: $1,000 minimum administrative fee for interest transfers
Performance Participation: 80% of profits to the investor up to a 13% IRR; above that, a 50/50 split with the Manager
Returns are presented net to the investor.
The fund is led by David Kotter and team, who bring over 21 years of commercial real estate lending experience, with over $2.1 billion in loans originated. The team has successfully navigated multiple market cycles and brings deep underwriting and real estate expertise.
This investment is ideal for 5–10% of a diversified portfolio, offering steady income with equity upside. It can help boost returns during market slumps, acts as an inflation hedge, and provides long-term growth potential through high-quality real estate exposure.
We provide loans ranging from $5 million to $15 million. This range allows us to serve experienced developers working on mid-sized to larger commercial real estate projects that benefit from flexible, strategic capital.
We lend against Multifamily, Industrial, Storage, and Strategic Retail properties. Our focus is on asset classes with strong fundamentals, clear demand drivers, and value-add or stabilized profiles where our capital can create a meaningful impact.
We offer 3-year, interest-only loans, with fixed-rate options available. Our capital is designed for speed and simplicity, with terms that align developer and investor interests:
Leverage: Up to 90% loan-to-cost (LTC), not to exceed 80% loan-to-value (LTV)
Structure: Interest-only for the term, with options to customize based on project needs
Recourse: Personal repayment is required until certain project milestones or performance hurdles are met, after which non-recourse options may be considered
Each loan is tailored during underwriting to reflect the deal’s unique risk-return profile.
Leverage: Up to 90% loan-to-cost (LTC), not to exceed 80% loan-to-value (LTV)
Structure: Interest-only for the term, with options to customize based on project needs
Recourse: Personal repayment is required until certain project milestones or performance hurdles are met, after which non-recourse options may be considered
Each loan is tailored during underwriting to reflect the deal’s unique risk-return profile.
We typically close in 45 to 60 days, though we can move faster in certain situations. Our process is built to be streamlined and transparent:
1. Initial Review – We evaluate the project, sponsor strength, and documentation fit.
2. Term Sheet Issued – If aligned, we provide a competitive and clear term sheet.
3. Committee Approval – Once the term sheet is signed, your deal is advanced to our investment committee.
4. Closing – Upon approval and final due diligence, we move swiftly to closing.
We stay highly communicative throughout, so there are no surprises or last-minute changes.
1. Initial Review – We evaluate the project, sponsor strength, and documentation fit.
2. Term Sheet Issued – If aligned, we provide a competitive and clear term sheet.
3. Committee Approval – Once the term sheet is signed, your deal is advanced to our investment committee.
4. Closing – Upon approval and final due diligence, we move swiftly to closing.
We stay highly communicative throughout, so there are no surprises or last-minute changes.
We provide higher leverage with less equity required — giving developers the capital they need without giving away their entire upside.
Our structure is a participating mortgage, which means:
We offer leverage up to 90% of total project cost, far beyond traditional debt providers.
Instead of requiring full equity dilution, we take a 30–35% share of the upside (above a preferred return), allowing you to retain more ownership and control.
You get faster execution, less paperwork, and no equity partner in your decision-making.
This hybrid structure is ideal for developers who want speed, certainty, and maximum alignment without having to syndicate capital or give up control.
Our structure is a participating mortgage, which means:
We offer leverage up to 90% of total project cost, far beyond traditional debt providers.
Instead of requiring full equity dilution, we take a 30–35% share of the upside (above a preferred return), allowing you to retain more ownership and control.
You get faster execution, less paperwork, and no equity partner in your decision-making.
This hybrid structure is ideal for developers who want speed, certainty, and maximum alignment without having to syndicate capital or give up control.
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“As an investor in the HDF 1 Fund providing capital for a loan in Mesa Arizona for the industrial land. I found the experience as a Capital provider to be transparent. The return on my capital was above market. The risk I felt was low due to the underwriting and the securitization of the loan through the land, and the borrower. Well done.”
Kevin S.
“I recently had the opportunity to invest in the Hybrid Debt Fund, and I couldn’t be more pleased with the outcome. The process was seamless and transparent, with clear communication throughout. The returns were as expected, and the overall experience was both rewarding and stress-free. I appreciate the professionalism and reliability demonstrated by the team involved. I would definitely consider investing in similar opportunities in the future.”