The following risk factors describe some, but not all, of the risks of an investment in EquityLine NY Limited Partnership. Prospective Investors are strongly encouraged to review the Prospectus in its entirety, including the section titled “Risk Factors”, for more information about the risks and uncertainties inherent in an investment in our limited partnership interests.
General – Start Up Status
The Company commenced preliminary business development operations on May 4, 2023, and it is organized as a limited partnership under the laws of the State of New York. The Company has only a limited history upon which an evaluation of its prospects and future performance can be made. The Company’s proposed operations are subject to all business risks associated with new enterprises but in this case supported by property management services with guaranteed rental income to provide supported returns for a portion of the portfolio. Guaranteed rental income coverage is being acquired to cover not only the acquired residential property assets acquired by the Company, or if the Company is lending to a borrower for residential rental assets, but the Pensio property management and guaranteed rental income program will form part of the loan security as a lending condition for mortgages. The likelihood of the Company’s success must be considered in light of the problems, expenses, difficulties, complications, and delays frequently encountered in connection with the development of real estate, operation in a competitive industry, and the continued development of advertising, promotions and a corresponding customer base. There is a possibility that the Company could sustain losses in the future.
There can be no assurances that the Company will operate profitably but the investor will have the protection of the tightly drafted and enforced investment criteria and a guaranteed rental income, where the performance assurance for the guaranteed rental income is secured by a performance bond from a surety with a minimum financial strength of A.M. Best A- (Excellent) or better. An investment in the limited partnership interests involves a number of risks. Investors should carefully consider the following risks and other information in this Prospectus before purchasing limited partnership interests. Without limiting the generality of the foregoing, Investors should consider, among other things, the following risk factors:
Should one or more of the foregoing risks or uncertainties materialize, or should the underlying assumptions of our business prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended or planned.
Inadequacy Of Funds
Management believes that while the offering proceeds will capitalize and sustain the Company to allow for the implementation of the Company’s business plans and the Company will be able to operate regardless of the capital raised. The investment program is fully scalable using offering proceeds for the Company and it can commence an investment program allowing it to fully develop its business. The property management and guaranteed rental income product for the assured returns is available regardless of the size or success of the offering but depends on the profile of the portfolio. The Pensio programs can provide residential rental property guarantee of rental performance and can do the same for loans to borrowers who have residential rental properties qualified as acceptable for the property management and guaranteed rental income programs by Pensio prior to the loan commitment and subject to forming part of the loan commitment and is obtained on a project by project basis. The Company has no plans to use debt financing for the mortgage portfolio but will seek debt financing, capital investment and financing for real estate purchases to fully implement the Company’s business plans. The ability to scale the investment portfolio and the use of Affiliates to provide, on an outsourced and payment deferred basis, all back room operations reduces this risk significantly.
Dependence On Management
In the early stages of development, the Company’s business will be significantly dependent on the Company’s management team which is employed by the Manager, an Affiliate member of the EquityLine Group. The Company’s success will be particularly dependent upon the Managing Member’s management team. The loss of any of these individuals on the management team could have a material adverse effect on the Company.
There is no minimum amount the Company must raise in this Offering in order to retain the Offering Proceeds, and even if the Company does not raise enough capital to profitably commence operations, Investors will not get their money back. This risk is mitigated by the scalable investment program and the guarantee product providing property management services with guaranteed income rental returns for acquired residential property assets and for loans to residential property mortgages which include the rental performance and guaranteed rental income assurance.
Risks Associated with Expansion
The Company plans on expanding its business through the acquisition or direct funding of the broker sourced mortgages acquired using the brokerage capacity of the EquityLine Group. Any expansion of operations the Company may undertake will entail risks, such actions may involve specific operational activities which may negatively impact the profitability of the Company. Consequently, the Investors must assume the risk that (i) such expansion may ultimately involve expenditures of funds beyond the resources available to the Company at that time, and (ii) management of such expanded operations may divert Management’s attention and resources away from its existing operations, all of which factors may have a material adverse effect on the Company’s present and prospective business activities.
General Economic Conditions
The financial success of the Company may be sensitive to adverse changes in general economic conditions in Canada and the United States, such as recession, inflation, unemployment, and interest rates. Such changing conditions could impact mortgage lending markets. The Company has no control over these changes.
Possible Fluctuations in Operating Results
The Company’s operating results may fluctuate significantly from period to period as a result of a variety of factors, including purchasing patterns of mortgages or mortgage notes, defaults, real estate performance and general economic conditions. Consequently, the Company’s revenues may vary by quarter, and the Company’s operating results may experience fluctuations.
Risks Of Borrowing
If the Company incurs indebtedness, a portion of its cash flow will have to be dedicated to the payment of principal and interest on such indebtedness. Typical loan agreements also might contain restrictive covenants which may impair the Company’s operating flexibility. Such loan agreements would also provide for default under certain circumstances, such as failure to meet certain financial covenants. A default under a loan agreement could result in the loan becoming immediately due and payable and, if unpaid, a judgment in favor of such lender which would be senior to the rights of owners of limited company interests of the Company. A judgment creditor would have the right to foreclose on any of the Company’s assets resulting in a material adverse effect on the Company’s business, operating results or financial condition. The property management with rental income guarantee product for the assured returns is not affected by the risks of the financing, this is taken into account in the product underwriting.
Unanticipated Obstacles to Execution of The Business Plan
The Company’s business plans may change. Management believes that the Company’s chosen activities and strategies are achievable in light of current economic and legal conditions with the skills, background, and knowledge of the Company’s Management and advisors. Management reserves the right to make significant modifications to the Company’s stated strategies depending on future events. These changes will not be made with the intention of changing the portfolio composition in a way which would change the support of the base revenue at 8% capital.
Management Discretion as To Use of Proceeds
The Net Proceeds from this Offering will be used for the purposes described under “Use of Proceeds.” The Company reserves the right to use the funds obtained from this Offering for other similar purposes not presently contemplated which it deems to be in the best interests of the Company and its Investors in order to address changed circumstances or opportunities. As a result of the foregoing, the success of the Company will be substantially dependent upon the discretion and judgment of Management with respect to application and allocation of the net proceeds of this Offering. Investors in the limited partnership interests offered hereby will be entrusting their funds to the Company’s Management, upon whose judgment and discretion the investors must depend.
Guaranteed Rental Income
The portfolio is being assembled to provide the base 8% on capital return, with property management services that include guaranteed rental income support and strict investment guidelines. There cannot, notwithstanding this express intention an absolute guarantee of the return despite the rental revenue guarantee.
No Voting Rights
The Membership Interests offered through this Offering have no voting rights except as to a limited list of fundamental changes. This means that Investors will have very limited control as to the operations of the Company.
Limited Transferability & Liquidity
To satisfy the requirements of certain exemptions from registration under the Securities Act, and to conform with applicable state securities laws, each investor must acquire his limited partnership interests for investment purposes only and not with a view towards distribution. Consequently, certain conditions of the Securities Act may need to be satisfied prior to any sale, transfer, or other disposition of the limited partnership interests. Some of these conditions may include a minimum holding period, availability of certain reports, including financial statements from the Company, limitations on the percentage of limited partnership interests sold and the manner in which they are sold. The Company can prohibit any sale, transfer or disposition unless it receives an opinion of counsel provided at the holder’s expense, in a form satisfactory to the Company, stating that the proposed sale, transfer or other disposition will not result in a violation of applicable federal or state securities laws and regulations. No public market exists for the limited partnership interests and no market is expected to develop. Consequently, owners of the limited partnership interests may have to hold their investment indefinitely and may not be able to liquidate their investments in the Company or pledge them as collateral for a loan in the event of an emergency or otherwise.
Long Term Nature of Investment
An investment in the limited partnership interests may be long term and illiquid. As discussed above, the offer and sale of the limited partnership interests will not be registered under the Securities Act or any foreign or state securities laws by reason of exemptions from such registration which depends in part on the investment intent of the investors. Prospective investors will be required to represent in writing that they are purchasing the limited partnership interests for their own account for long-term investment and not with a view towards resale or distribution. Accordingly, purchasers of limited partnership interests must be willing and able to bear the economic risk of their investment for an indefinite period of time. It is likely that investors will not be able to liquidate their investment in the event of an emergency.
The offering price of the limited partnership interests offered has initially been arbitrarily established by the Company, considering such matters as the state of the Company’s business development and the general condition of the industry in which it operates. The Offering price bears little relationship to the assets, net worth, or any other objective criteria of value applicable to the Company. The price will be adjusted annually within 30 days after each fiscal year end to the NAV of the Company’s asset portfolio.