Question 1

1) WHAT IS ALTA REAL ESTATE’S INVESTMENT THESIS?

Accepted Answer

MORTGAGES & SALE-LEASEBACKS
Alta Real Estate acquires downstream real estate properties at fair market values based on recent market comps and third-party appraisals.  The fund avoids paying any cannabis premiums on these assets and leases the properties to licensed, creditworthy cannabis operators.  The fund's standard collateral packages consists of:
 • [3] months' security deposit;
 • [12] months’ estimated NNN expenses;
 • Personal and/or corporate guarantees; and,
 • Other collateral to be determined on a case by case basis.
Alta’s GP must execute these transactions with the following general restrictions:
 • For each acquisition, Alta must own at least [51]% of the asset and have at least a [3]-year lease agreement yielding a minimum [8]% annual cap rate.
 • No single acquisition can represent more than [40]% of the fund’s capital.
FOR ASSET-BACKED CREDIT FACILITIES
Alta Real Estate lends capital to licensed cannabis companies across the U.S. that are secured with well-priced real estate, avoiding any cannabis premiums on the collateral. Loan proceeds must be used for growth initiatives like construction, working capital, and debt refinancing. The fund seeks collateral packages consisting of:
 • A maximum LTV of [70]%;
 • [3] months’ Debt Service Reserve Account;
 • Personal and/or corporate guarantees; and,
 • Other collateral to be determined on a case by case basis.
Alta’s GP must execute transactions with the following general restrictions:
 • Loan term must be under [10] years;
 • No single loan can represent more than [40]% of the fund’s capital.

Question 2

2) WHAT IS THE TARGET RETURN TO INVESTORS FOR THE ALTA RE FUND?

Accepted Answer

Alta Real Estate targets [12]%+ unlevered, annual cash-on-cash returns with [3]% annual increases. Our model includes additional potential upside from i) mortgaging portfolio assets and using the proceeds to pay dividends to our investors, and ii) selling portfolio assets back to the tenant or to a third party at a premium. Our base case financial model generates an IRR of +[20]%.

Question 3

3) DO ALTA’S HIGHER EXPECTED RETURNS IMPLY A HIGHER RISK?

Accepted Answer

No, all transactions are structured with strong downside protection and are backed by real estate, resulting in a low risk profile.  The expected returns reflect current market conditions.  The cannabis industry is growing at a double-digit CAGR with sales, public support and use rates at an all-time high.  However, cannabis is not yet federally legal and therefore lacks access to traditional financing.  Even companies with the strongest financials and operating histories are excluded from bank loans, mortgages and institutional capital.  Lack of capital combined with the industry’s unprecedented secular growth supports Alta’s financing terms and its subsequent outsized returns.

Question 4

4) HOW LONG HAVE THE GENERAL PARTNERS BEEN MANAGING INVESTMENTS IN THE US CANNABIS INDUSTRY?

Accepted Answer

Since 2017.

Question 5

5) HOW MUCH DO THE GENERAL PARTNERS INVEST IN THE FUND?

Accepted Answer

The GP's contribution currently equals +[13]% of the fund's total capital. The GP has an obligation to contribute at least [3]% of all investor capital commitments into the fund.

Question 6

6) IS IT LEGAL TO INVEST IN ALTA IF CANNABIS IS NOT YET FEDERALLY LEGAL?

Accepted Answer

For portfolio properties, Alta's tenants are licensed companies that operate in full compliance with state laws, and precedence shows that landlords are not subject to increased risk if they are not interest holders in the cannabis license. For the credit facilities, the borrower is the real estate owner, not the actual operating company, and therefore Alta never lends money directly to a licensed cannabis entity.  Our investments are considered ancillary and are not plant touching, allowing us to avoid the legal scrutiny faced by cannabis operators. In the event that an Alta tenant or borrower engages in illegal activity and has their assets seized, such seizure consists only of the tenant’s or borrower’s net equity; the Alta fund(s) would still have due process in which any recorded liens must be paid in full as well as all collateral executed in the lender’s benefit.  We always recommend consulting legal counsel prior to investing to understand all potential risks.

Question 7

7) SINCE CANNABIS IS NOT FEDERALLY LEGAL, DO LENDERS, BORROWERS OR TENANTS PAY ALTA IN CASH?"

Accepted Answer

No.  All payments are made to Alta via wire transfers or certified checks.

Question 8

8) WHAT WILL HAPPEN TO RETURNS IF THE GOVERNMENT LEGALIZES CANNABIS AT THE FEDERAL LEVEL?

Accepted Answer

Upon federal legalization, we do expect cap rates to compress to market rates; however, legalization would also provide the opportunity to mortgage our portfolio assets, which would transform our unlevered returns into levered returns. We could use the mortgage proceeds to pay dividends to investors or stretch our equity by investing in new properties and credit facilities.

Question 9

9) WHAT IS THE MINIMUM INVESTMENT AMOUNT?

Accepted Answer

The minimum investment amount is US $250,000.

Question 10

10) WHAT FEES DO I PAY AS AN INVESTOR?

Accepted Answer

Alta Real Estate investors pay an annual management fee of [1.6]% which is split into:
 • 0.8% fixed management fee over committed capital, and
 • 0.8% management fee over invested capital
After the investors receive a [20]% preferred pre-tax return (including repayment of all management fees), there is a carried interest waterfall structure which is split between the LP and GP depending on the total investment yield.

Question 11

11) WHAT IS THE INVESTMENT PERIOD?

Accepted Answer

The GP has [2] years from the close of each capital commitment to deploy all of the equity raised from investors in that round.

Question 12

12) HOW LONG DOES IT TAKE FOR INVESTORS TO START GENERATING RETURNS ON INVESTED CAPITAL?

Accepted Answer

The fund operates on a capital-call basis, so investors don't send committments until the GP is ready to close on a transaction. This means investors start generating returns immediately once an acquisition or a loan is closed and payments begin.

Question 13

13) HOW OFTEN DOES THE FUND PAY DISTRIBUTIONS?

Accepted Answer

Investors receive distributions from each transaction on a semi-annual basis, paid every April and every October.

Question 14

14) IS THE FUND LEVERAGED?

Accepted Answer

Not at this time but we are open to such possibility in the future.

Question 15

15) WHO MAKES ALL INVESTMENT DECISIONS?

Accepted Answer

The General Partner makes all investment decisions.  The investment thesis is written in the Limited Partnership agreement and its Supplement as well as the Subscription Agreement, which all investors agree to upon confirmation of their capital commitments.

Question 16

16) HOW MANY TRANSACTIONS HAVE THE ALTA FUNDS COMPLETED AS OF 2Q2021?

Accepted Answer

Alta Real Estate has closed [11] transactions, having invested over $[23,000,000] total.
 
Due to our extreme discipline and rigorous diligence process, we will only pursue the best investment opportunities with the most creditworthy operators.

Question 17

17) DOES ALTA ONLY TRANSACT WITH CALIFORNIA CANNABIS OPERATORS?

Accepted Answer

No, Alta evaluates transactions in all states where cannabis has been legalized for medical or adult use.  Our primary target markets include cities with friendly regulators, high commercial property values and states where the cannabis economy is burgeoning, which provides additional confidence in the strength of our borrowers’ and tenants’ businesses.

Question 18

18) HOW DOES THE GP SOURCE NEW DEALS?

Accepted Answer

Alta has an exclusive first look right and advertisement agreement with CannaMLS, a platform for selling cannabis real estate that receives over [50] new listings per week.  
 
In addition to the relationship with CannaMLS, Alta has also developed a robust network of experienced brokers that consistently refer opportunities for our consideration.

Question 19

19) WHAT ARE THE COMPS/VALUATION METHODS WE USE WHEN ACQUIRING A PROPERTY OR MEASURING OUR COLLATERAL UNDER A LOAN?

Accepted Answer

We use recent, local, non-cannabis sale comps in addition to third-party appraisals for property valuations. All of our assets must be well-priced and avoid green zone premiums to ensure adequate downside protection for investors.

Question 20

20) WHAT IS A GREEN ZONE?

Accepted Answer

A green zone is the area within a municipal boundary that has been designated to allow for commercial cannabis businesses to operate.  Green zones tend to be limited in size and the properties within those zones are often subject to additional zoning restrictions, like a minimum distance “buffer” from a school or park, making the best properties within a green zone more valuable to cannabis operators.  Alta avoids paying a green zone premium by evaluating the value of the property as if it were not inside a cannabis green zone.  If the fund needs to sell or lease the property to a non-cannabis operator in the future, there would be no significant value loss on the asset.

Question 21

21) HOW LONG DOES IT TAKE TO EXECUTE REAL ESTATE COLLATERAL?

Accepted Answer

Typically, between 1 and 6 months.

Question 22

22) WHAT IS THE ALTERNATIVE USE FOR THESE PROPERTIES IN CASE OF DEFAULT?

Accepted Answer

Since the fund targets downstream assets (mainly retail and industrial), the properties can be leveraged and then sold or leased to non-cannabis companies, if ever necessary. The redevelopment value of a "last mile" portfolio like ours is especially secure with the recent uptick in e-commerce sales as a result of the COVID pandemic. Alta looks at the true value of the commercial real estate, removing any cannabis premium or “green-zone” premium.

Question 23

23) WHAT IS A FINANCIAL INTEREST HOLDER? IS ALTA OR ALTA INVESTORS CONSIDERED A FINANCIAL INTEREST HOLDER?

Accepted Answer

States that include disclosure requirements for individuals and entities that have interests in a licensed cannabis company will often differentiate between having a direct equity interest, which would make them an owner in the cannabis company, and having some other financial interest in the company, classifying them as a “financial interest holder” instead. Financial interest holders include individuals or companies that make loans to cannabis entities or who take a percentage of profits or revenue from the cannabis entity.
 
Landlords that charge a predetermined, fair market value lease rate to cannabis tenants are exempt from being classified as a financial interest holder, so Alta Real Estate and its investors’ identities do not need to be disclosed.

Question 24

24) WHAT ARE THE POTENTIAL RISKS FOR A FOREIGN INVESTOR IN WHOSE COUNTRY CANNABIS HAS NOT BEEN LEGALIZED?

Accepted Answer

Our legal team has structured the funds to ensure that the fund does not participate in plant touching enterprises.  Alta Real Estate will acquire real estate assets and lease them to licensed cannabis operators, but will have no ownership interest or control in the plant touching business. As always, we recommend you seek counsel regarding all legal and tax concerns prior to investing.

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