SEC Company Response from Point Center Mortgage Fund I, LLC (CIK 0001299020) — May 20, 2005
Point Center Mortgage Fund I, LLC (CIK 0001299020)
Date: May 20, 2005 · CIK: 0001299020 · Accession: 0001144204-05-016523
AI Filing Summary & Sentiment
File numbers found in text: 333-105017, 333-118871
Referenced dates: June 4, 2001, June 4, 2004, May 5, 2005
Letter
May 20, 2005 Via Federal Express Securities and Exchange Commission Division of Corporation Finance 450 Fifth Street, N.W. Washington, D.C. 20549 ATTN: Elaine Wolff, Branch Chief
Re: Point Center Mortgage Fund I, LLC Amendment No. 3 to Registration Statement on Form S-11--Registration No. 333-118871 -----------------------------------------
Dear Ms. Wolff:
On behalf of Point Center Mortgage Fund I, LLC (the "Fund"), enclosed herewith in connection with the filing today via EDGAR of Amendment No. 3 ("Amendment No. 3") to the Fund's Registration Statement on Form S-11 Registration No. 333-118871 (the "Registration Statement"), please find the following:
One (1) conformed copy of Amendment No. 3 that (i) has been marked to show changes from Amendment No. 2 to the Registration Statement ("Amendment No. 2"), and (ii) cross-references the changes in response to the numbered comments to the Amendment No. 2 that are set forth in the letter of the staff of the Securities and Exchange Commission (the "Staff") dated May 5, 2005 (the "Comment Letter").
In addition, under separate cover, you will be receiving the following from Vintage Filings, LLC:
1. Five (5) conformed copies of Amendment No. 3;
2. Five (5) additional conformed copies of Amendment No. 3 which have been marked to show changes from the Registration Statement.
The Fund currently expects to request effectiveness on or about May 31, 2005. As soon as a definitive determination has been made, the appropriate acceleration request will be forwarded to you.
The following responses have been numbered to correspond to the paragraph numbers set forth in the Staff's Comment Letter. General <PAGE>
1. This response letter and all future correspondences will be filed on EDGAR.
2. The offering is not "delayed offering", rather it is a "best efforts offering" with a price that is fixed at $1,000 per unit during the "blind pool" period. Only after the Fund has made loans that are accruing income and expense, will the offering price be adjusted to reflect the book value of the units. We intend to file a prospectus supplement to announce changes in the offering price in the same manner as did Vestin Fund III, LLC (Registration No. 333-105017), please see, e.g., its filing under Rule 424(b)(3) on November 10, 2004.
3. The requested revisions have been made in the in the share table on the cover of the Registration Statement and on the cover of the prospectus to indicate the amount of units that are being offered pursuant to the distribution reinvestment plan.
4. We again, respectfully, wish to again ask for relief from the disclosure requirements of Guide 5, for the following reasons:
(i) While the offering, at its outset, will be a "blind pool" it is the Fund's belief that during a substantial majority of the 2-year offering period, specified loans will be disclosed via prospectus supplements and investors will be reviewing loan portfolio disclosures prior to their decision to purchase units. This belief is founded on proven ability of Point Center Financial, Inc., the Fund's manager ("PCF"), to raise capital and originate loans. In fact during the first quarter of 2005, PCF has originated in excess of $80,000,000 of loans funded with private equity.
(ii) The automated accounting/computerized loan servicing programs of PCF are not configured to generate the types of information breakdowns for the loan portfolios of the prior programs that Guide 5 requests. It would require the manual review of over 400 loans to produce the 10 year narrative disclosures and over 150 loans to produce the 3 year tabular disclosures. Clearly, this would be a substantial hardship on the management personnel of PCF, and it would also not be reasonably practicable that such a review could take place during normal working hours. Therefore, Guide 5 compliance would cause a substantial delay in the Fund's ability to commence this offering. Please recall that PCF has and will continue to absorb 100% of the costs of the Fund's offering.
(iii) The Fund and PCF are concerned that the more detailed information required by Guide 5 could create investor confusion or unintended reliance that the Fund's loan portfolio might replicate those of the prior programs managed by PCF. Given the rapidly changing dynamics of the lending industry during the prior performance period and the expectation that such changes will continue during the offering period, the macro-disclosures of prior performance contained in the prospectus seem much more appropriate and material to investors than the micro-disclosures requirements of Guide 5. What is important is PCF's proven ability to raise capital and to then originate loans. In that regard, PCF has been in the mortgage lending business for over 30 years, during which time PCF has raised over $550,000,000 in private equity from approximately 2000 investors, which has been used to make loans originated and serviced by PCF. Less important, if at all in a constantly changing environment, is the minutia relating to the types of loans and their specific loan characteristics.
Therefore, the Fund and PCF respectfully submit that the current discloses set forth in the prospectus relating to the investment objectives of the Fund, when read together with the current prior performance disclosures, will provide investors with all material information necessary to make an informed investment decision with respect to the units being offered. Given the substantial time and expense that PCF has committed to the offering on the behalf of the Fund and its prospective investors, it is hoped that the undue hardship that would be encountered in complying with Guide 5 can be avoided under the circumstances set forth above and in light of the current disclosures contained in the prospectus.
<PAGE>
5. Supplementally we advise you that the repurchases of units should be not treated as tender offers under Rule 13e-4 and Regulation 14E of the Exchange Act for substantially the same reasons stated in T REIT Inc. (Letter dated June 4, 2001) and Hines Real Estate Investment Trust, Inc. (Letter dated June 4, 2004). As was the case with those issuers, the Fund's repurchases of units shares the following facts, among others: unitholders of the Fund must have held the units for at least two (2) years prior to requesting that any of their units be repurchased by the Fund; there will be no trading market for the units; the price paid to unitholders will be the book value of the units determined at the time of repurchase; in any consecutive 12-month period the number of units repurchased by the will not exceed 10% of the number of units of outstanding as of the beginning of such 12-month period; and the terms of the repurchase process is fully disclosed in the Fund's prospectus.
Cover Page
6. The Fund confirms that the final "printed" version of the cover page will be formatted to include all of the information on one page by using columnar presentations or otherwise. In addition, as requested, the 10 paragraphs following the summary risk factors from the prospectus cover have been removed.
Investor Suitability Standards
7. As requested, the additional suitability standards have been disclosed.
8. Supplementally we advise you that the offering has currently been qualified, subject to notification of SEC effectiveness, in the following states: California, Colorado, Florida, Illinois and Nevada.
Table of Contents
9. As requested, the risk factor subheadings have been added.
Summary, page 1
10. As requested, a discussion has been added to the Summary and a risk factor has been relating to the pricing mechanism for the offering.
Summary Risk Factors, page 4
11. As requested, the statements that 10 loans will adequately diversify the portfolio have been removed.
12. As requested, the risk factors have been revised.
<PAGE>
Compensation to our Manager and its Affiliates, page 7
13. As requested, the language has been revised to indicate a targeted loan spread.
Operating agreement, page 11
14. As requested the statement regarding conflicts between the prospectus and the Operating Agreement has been removed.
Escrow Procedures, page 11
15. As requested, the non-interest bearing language has been added.
To Purchase Units, page 12
16. Supplementally, the Fund confirms that a prospectus will proceed or accompany the subscription agreement.
17. As requested, the disclosure has been revised to state that investors will not be given loan documents to review before or after their investment.
Risk Factors, page 12
You may face a delay before distributions begin, page 15
18. The last sentence of this risk factor has been deleted.
We may not have sufficient capital to meet our staged funding commitments, page 18
19. As requested, the second paragraph and the related bullets have been deleted.
Conflict of Interest Risks, page 19
20. As requested, the headings of these risks have been revised.
Investment Objectives and Policies, page 25
Borrowing, page 29
21. As requested, the additional disclosure has been added.
Management, page 36
Prior Experience of our Manager, page 38
22. All of the prior performance discussion relates solely to the four programs sponsored by PCF and they all involve PCF's activities as a mortgage broker originating loans. Each and every loan in the prior performance discussion reflects loans originated by PCF which have been funded by private party investors who either purchase an undivided interest in the loan itself (a fractional note), or who purchase a certificate or shares in one of PCF's three (3) pooled programs. All of the loans are serviced by PCF. None of the prior performance loans were brokered to outside institutional lenders.
<PAGE>
23. Please see comment response 4, above.
24. As requested, the additional disclosure has been added.
Management's Discussion and Analysis of Financial Condition and Results of Operations, page 48
25. As requested, the additional disclosure has been added.
26. As requested, the additional disclosure has been added.
Summary of Operating Agreement, Rights of Members and Description of Units, page
Redemption of Units, page 59
27. As requested, this section has been revised.
Federal Income Tax Consequences, page 59
28. A draft of the tax opinion was submitted as Exhibit C to comment response 127 of Amendment No. 1 to the Registration Statement. A revised draft of the opinion is included herewith as Exhibit B in response to comments 35-37 below, and the final opinion will be filed by pre-effective amendment as Exhibit 5.2 to the Registration Statement.
Legal Matters, page 52
29. As requested, the disclosure has been revised.
Financial Statements
General
30. The Fund will continue to monitor the updating requirements of Rule 3-12 of Regulation S-X.
Note 1 Summary of Significant Accounting Policies
Investments in trust deed notes receivable, page F-8
31. PCF recognizes that there will be times when the amount of the current portion of the trust deeds receivable in the collateral pool and other trust deeds receivable (due with in 12 months) is less than the amount of the current portion of program certificates payable (due with in 12 months). Management has the ability to cope with this situation by:
1. Maintaining a sufficient cash balance to meet monthly maturities;
2. Maintaining an open line of credit with its financial institution far in excess of its monthly working capital needs;
3. Ability to assign at face value (or cost basis) existing receivables in the collateral pool to many other lenders that may be either private individuals or other mortgage pools;
<PAGE>
4. Using cash flow from normal business operations; and
5. Issuing new certificates.
Due to the above sources of funds, PCF believes it has the ability to meet existing and future maturities, and therefore is able to carry the trust deeds at amortized cost and will never have to transfer a trust deed at a discounted cost due because of this reason. Therefore, PCF's primary intent is to hold loans in the collateral pool and other trust deeds until maturity. Also, please note that at all times the total trust deeds receivable in the collateral pool are greater than or equal too the total program certificates payable.
32. SFAS 115 applies to PCF's loan receivable classified as collateral in the balance sheet because the term "debt security" is defined in part in Appendix C: Glossary, as follows:
"Debt Security
Any security representing a creditor relationship with an enterprise. It also includes (a) preferred stock that by its terms either must be redeemed by the issuing enterprise or is redeemable at the option of the investor and (b) collateralized mortgage obligation (CMO) (or other instrument) that is issued in equity form but is required to be accounted for as a nonequity instrument regardless of how that instrument is classified (that is, whether equity or debt) in the issuer's statement of financial position. However, it excludes option contracts, financial futures contract, forward contracts and lease contracts. Thus, the term debt security includes, among other items, U.S. Treasury securities, U.S. government agency securities, municipal securities, corporate bonds, convertible debt, commercial paper, all securitized debt instruments [emphasize added], such as CMO's and real estate mortgage investment conduits (REMIC's), and interest only and principal only strips."
The loans receivable classified as collateral in the balance sheet falls under the definition of "securitized debt instruments" because loans issued are secured by trust deeds.
Commission Income, page F-10; Loan Origination Costs, page F-11
33. PCF's primary business is the brokering of loans to outside lenders and borrowers. They conduct this business under a Broker License issued by the Commissioner of the California Department of Real Estate. Their primary source of income is from broker fees (commission) related to the brokering of the loan, and the related services associated with the process. The income is not a form of lender fees or poi
Show Raw Text
<DOCUMENT>
<TYPE>CORRESP
<SEQUENCE>1
<FILENAME>filename1.txt
<TEXT>
Corporate Law Solutions
A Professional Law Corporation
[LOGO] CLS
Gregory W. Preston,
Esq.
Managing Director
2112 Business Center Dr., 2nd Floor Direct Dial: 949.252.9252
Irvine, California 92612-7135 Facsimile: 949.757.0667
Email: gpreston@corp-law.com
May 20, 2005
Via Federal Express
Securities and Exchange Commission
Division of Corporation Finance
450 Fifth Street, N.W.
Washington, D.C. 20549
ATTN: Elaine Wolff, Branch Chief
Re: Point Center Mortgage Fund I, LLC
Amendment No. 3 to Registration Statement
on Form S-11--Registration No. 333-118871
-----------------------------------------
Dear Ms. Wolff:
On behalf of Point Center Mortgage Fund I, LLC (the "Fund"), enclosed
herewith in connection with the filing today via EDGAR of Amendment No. 3
("Amendment No. 3") to the Fund's Registration Statement on Form S-11
Registration No. 333-118871 (the "Registration Statement"), please find the
following:
One (1) conformed copy of Amendment No. 3 that (i) has been marked
to show changes from Amendment No. 2 to the Registration Statement
("Amendment No. 2"), and (ii) cross-references the changes in
response to the numbered comments to the Amendment No. 2 that are
set forth in the letter of the staff of the Securities and Exchange
Commission (the "Staff") dated May 5, 2005 (the "Comment Letter").
In addition, under separate cover, you will be receiving the following
from Vintage Filings, LLC:
1. Five (5) conformed copies of Amendment No. 3;
2. Five (5) additional conformed copies of Amendment No. 3 which have
been marked to show changes from the Registration Statement.
The Fund currently expects to request effectiveness on or about May 31,
2005. As soon as a definitive determination has been made, the appropriate
acceleration request will be forwarded to you.
The following responses have been numbered to correspond to the paragraph
numbers set forth in the Staff's Comment Letter. General
<PAGE>
1. This response letter and all future correspondences will be filed on
EDGAR.
2. The offering is not "delayed offering", rather it is a "best efforts
offering" with a price that is fixed at $1,000 per unit during the "blind pool"
period. Only after the Fund has made loans that are accruing income and expense,
will the offering price be adjusted to reflect the book value of the units. We
intend to file a prospectus supplement to announce changes in the offering price
in the same manner as did Vestin Fund III, LLC (Registration No. 333-105017),
please see, e.g., its filing under Rule 424(b)(3) on November 10, 2004.
3. The requested revisions have been made in the in the share table on the
cover of the Registration Statement and on the cover of the prospectus to
indicate the amount of units that are being offered pursuant to the distribution
reinvestment plan.
4. We again, respectfully, wish to again ask for relief from the
disclosure requirements of Guide 5, for the following reasons:
(i) While the offering, at its outset, will be a "blind pool" it is the
Fund's belief that during a substantial majority of the 2-year offering period,
specified loans will be disclosed via prospectus supplements and investors will
be reviewing loan portfolio disclosures prior to their decision to purchase
units. This belief is founded on proven ability of Point Center Financial, Inc.,
the Fund's manager ("PCF"), to raise capital and originate loans. In fact during
the first quarter of 2005, PCF has originated in excess of $80,000,000 of loans
funded with private equity.
(ii) The automated accounting/computerized loan servicing programs of PCF
are not configured to generate the types of information breakdowns for the loan
portfolios of the prior programs that Guide 5 requests. It would require the
manual review of over 400 loans to produce the 10 year narrative disclosures and
over 150 loans to produce the 3 year tabular disclosures. Clearly, this would be
a substantial hardship on the management personnel of PCF, and it would also not
be reasonably practicable that such a review could take place during normal
working hours. Therefore, Guide 5 compliance would cause a substantial delay in
the Fund's ability to commence this offering. Please recall that PCF has and
will continue to absorb 100% of the costs of the Fund's offering.
(iii) The Fund and PCF are concerned that the more detailed information
required by Guide 5 could create investor confusion or unintended reliance that
the Fund's loan portfolio might replicate those of the prior programs managed by
PCF. Given the rapidly changing dynamics of the lending industry during the
prior performance period and the expectation that such changes will continue
during the offering period, the macro-disclosures of prior performance contained
in the prospectus seem much more appropriate and material to investors than the
micro-disclosures requirements of Guide 5. What is important is PCF's proven
ability to raise capital and to then originate loans. In that regard, PCF has
been in the mortgage lending business for over 30 years, during which time PCF
has raised over $550,000,000 in private equity from approximately 2000
investors, which has been used to make loans originated and serviced by PCF.
Less important, if at all in a constantly changing environment, is the minutia
relating to the types of loans and their specific loan characteristics.
Therefore, the Fund and PCF respectfully submit that the current discloses set
forth in the prospectus relating to the investment objectives of the Fund, when
read together with the current prior performance disclosures, will provide
investors with all material information necessary to make an informed investment
decision with respect to the units being offered. Given the substantial time and
expense that PCF has committed to the offering on the behalf of the Fund and its
prospective investors, it is hoped that the undue hardship that would be
encountered in complying with Guide 5 can be avoided under the circumstances set
forth above and in light of the current disclosures contained in the prospectus.
2
<PAGE>
5. Supplementally we advise you that the repurchases of units should be
not treated as tender offers under Rule 13e-4 and Regulation 14E of the Exchange
Act for substantially the same reasons stated in T REIT Inc. (Letter dated June
4, 2001) and Hines Real Estate Investment Trust, Inc. (Letter dated June 4,
2004). As was the case with those issuers, the Fund's repurchases of units
shares the following facts, among others: unitholders of the Fund must have held
the units for at least two (2) years prior to requesting that any of their units
be repurchased by the Fund; there will be no trading market for the units; the
price paid to unitholders will be the book value of the units determined at the
time of repurchase; in any consecutive 12-month period the number of units
repurchased by the will not exceed 10% of the number of units of outstanding as
of the beginning of such 12-month period; and the terms of the repurchase
process is fully disclosed in the Fund's prospectus.
Cover Page
6. The Fund confirms that the final "printed" version of the cover page
will be formatted to include all of the information on one page by using
columnar presentations or otherwise. In addition, as requested, the 10
paragraphs following the summary risk factors from the prospectus cover have
been removed.
Investor Suitability Standards
7. As requested, the additional suitability standards have been disclosed.
8. Supplementally we advise you that the offering has currently been
qualified, subject to notification of SEC effectiveness, in the following
states: California, Colorado, Florida, Illinois and Nevada.
Table of Contents
9. As requested, the risk factor subheadings have been added.
Summary, page 1
10. As requested, a discussion has been added to the Summary and a risk
factor has been relating to the pricing mechanism for the offering.
Summary Risk Factors, page 4
11. As requested, the statements that 10 loans will adequately diversify
the portfolio have been removed.
12. As requested, the risk factors have been revised.
3
<PAGE>
Compensation to our Manager and its Affiliates, page 7
13. As requested, the language has been revised to indicate a targeted
loan spread.
Operating agreement, page 11
14. As requested the statement regarding conflicts between the prospectus
and the Operating Agreement has been removed.
Escrow Procedures, page 11
15. As requested, the non-interest bearing language has been added.
To Purchase Units, page 12
16. Supplementally, the Fund confirms that a prospectus will proceed or
accompany the subscription agreement.
17. As requested, the disclosure has been revised to state that investors
will not be given loan documents to review before or after their investment.
Risk Factors, page 12
You may face a delay before distributions begin, page 15
18. The last sentence of this risk factor has been deleted.
We may not have sufficient capital to meet our staged funding commitments,
page 18
19. As requested, the second paragraph and the related bullets have been
deleted.
Conflict of Interest Risks, page 19
20. As requested, the headings of these risks have been revised.
Investment Objectives and Policies, page 25
Borrowing, page 29
21. As requested, the additional disclosure has been added.
Management, page 36
Prior Experience of our Manager, page 38
22. All of the prior performance discussion relates solely to the four
programs sponsored by PCF and they all involve PCF's activities as a mortgage
broker originating loans. Each and every loan in the prior performance
discussion reflects loans originated by PCF which have been funded by private
party investors who either purchase an undivided interest in the loan itself (a
fractional note), or who purchase a certificate or shares in one of PCF's three
(3) pooled programs. All of the loans are serviced by PCF. None of the prior
performance loans were brokered to outside institutional lenders.
4
<PAGE>
23. Please see comment response 4, above.
24. As requested, the additional disclosure has been added.
Management's Discussion and Analysis of Financial Condition and Results of
Operations, page 48
25. As requested, the additional disclosure has been added.
26. As requested, the additional disclosure has been added.
Summary of Operating Agreement, Rights of Members and Description of Units, page
53
Redemption of Units, page 59
27. As requested, this section has been revised.
Federal Income Tax Consequences, page 59
28. A draft of the tax opinion was submitted as Exhibit C to comment
response 127 of Amendment No. 1 to the Registration Statement. A revised draft
of the opinion is included herewith as Exhibit B in response to comments 35-37
below, and the final opinion will be filed by pre-effective amendment as Exhibit
5.2 to the Registration Statement.
Legal Matters, page 52
29. As requested, the disclosure has been revised.
Financial Statements
General
30. The Fund will continue to monitor the updating requirements of Rule
3-12 of Regulation S-X.
Note 1 Summary of Significant Accounting Policies
Investments in trust deed notes receivable, page F-8
31. PCF recognizes that there will be times when the amount of the current
portion of the trust deeds receivable in the collateral pool and other trust
deeds receivable (due with in 12 months) is less than the amount of the current
portion of program certificates payable (due with in 12 months). Management has
the ability to cope with this situation by:
1. Maintaining a sufficient cash balance to meet monthly maturities;
2. Maintaining an open line of credit with its financial institution
far in excess of its monthly working capital needs;
3. Ability to assign at face value (or cost basis) existing receivables
in the collateral pool to many other lenders that may be either
private individuals or other mortgage pools;
5
<PAGE>
4. Using cash flow from normal business operations; and
5. Issuing new certificates.
Due to the above sources of funds, PCF believes it has the ability to meet
existing and future maturities, and therefore is able to carry the trust deeds
at amortized cost and will never have to transfer a trust deed at a discounted
cost due because of this reason. Therefore, PCF's primary intent is to hold
loans in the collateral pool and other trust deeds until maturity. Also, please
note that at all times the total trust deeds receivable in the collateral pool
are greater than or equal too the total program certificates payable.
32. SFAS 115 applies to PCF's loan receivable classified as collateral in
the balance sheet because the term "debt security" is defined in part in
Appendix C: Glossary, as follows:
"Debt Security
Any security representing a creditor relationship with an enterprise. It
also includes (a) preferred stock that by its terms either must be
redeemed by the issuing enterprise or is redeemable at the option of the
investor and (b) collateralized mortgage obligation (CMO) (or other
instrument) that is issued in equity form but is required to be accounted
for as a nonequity instrument regardless of how that instrument is
classified (that is, whether equity or debt) in the issuer's statement of
financial position. However, it excludes option contracts, financial
futures contract, forward contracts and lease contracts. Thus, the term
debt security includes, among other items, U.S. Treasury securities, U.S.
government agency securities, municipal securities, corporate bonds,
convertible debt, commercial paper, all securitized debt instruments
[emphasize added], such as CMO's and real estate mortgage investment
conduits (REMIC's), and interest only and principal only strips."
The loans receivable classified as collateral in the balance sheet falls under
the definition of "securitized debt instruments" because loans issued are
secured by trust deeds.
Commission Income, page F-10; Loan Origination Costs, page F-11
33. PCF's primary business is the brokering of loans to outside lenders
and borrowers. They conduct this business under a Broker License issued by the
Commissioner of the California Department of Real Estate. Their primary source
of income is from broker fees (commission) related to the brokering of the loan,
and the related services associated with the process. The income is not a form
of lender fees or poi