FAQs Frequently Asked Questions
The financial model of Fulton Street Investors LLC is fairly straightforward. Our Fund will raise money through a Direct Public Offering to buy and renovate property on or near Fulton Street in downtown Fresno. We will focus on property with strong ground floor retail potential. While some property may have upstairs uses for residential or office, our model is primarily focused on furthering revitalization by leasing to foot traffic-generating businesses like entertainment, dining, and retail.
To be as conservative as possible, and to protect our Fund and investors, we will not leverage our property with loans—we will purchase and renovate with cash only. This way, we can weather potential ups and downs in the real estate and commercial leasing cycles. This will also give greater protection against potential risks or delays to the revitalization process.
Our investors will have the opportunity to have a return on investment through net profits generated by lease activity and/or through any future sales of their investment units and the appreciated value of the property portfolio.
A Direct Public Offering (DPO) is a term that refers to a public offering of securities by a business or nonprofit to both accredited and non-accredited investors in one or more states. Using a DPO (also known as Investment Crowdfunding), a business or nonprofit can market and advertise its offering publicly: through advertising in newspapers and magazines, at public events and private meetings, on the internet and through social media channels.
-- from the Cutting Edge Capital website. More details on our "What is a DPO?" page.
Cutting Edge Capital is a B Corporation located in California that specializes in Direct Public Offerings. Together with their sister law firm, Cutting Edge Counsel, they did our legal work, including our application to the State, and will be our experienced guides through this process.
Investing in a downtown prior to revitalization has the potential to capture increased property values, which are partially achieved through rising rents. With the $20 million reintroduction of traffic to Fulton Street, downtown Fresno is on course for a major transformation. Around the United States, downtowns that have reintroduced traffic to a pedestrian mall have seen incredible increases in foot traffic, lease rates, building occupancy, sales, and property values.
Downtown housing has strong rent rates and occupancy rates, which bring loyal customers and increased activity. Property owners have recently united their efforts and assessed themselves through a Property and Business Improvement District. The City has set the stage for private and public investment through the Fulton Corridor Specific Plan and Downtown Zoning Code. Looking further into the future, the first High Speed Rail station in the U.S. is designated within our targeted investment area.
Our business model will return approximately one half of our net revenue from our tenants' rent payments to investors' accounts based on their proportional percentage share of the Fund. Additionally, we will report the value of the overall property to investors in the annual report. This will represent the true current value of the Fund. Should an investor wish to sell his or her interest back to the Fund, or to a different Fund investor or another qualified individual or entity, the value of said interest would be reflected in his or her capital account balance.
There are two primary ways we believe our approach reduces risk to our investors. First, we are investing in real property, not businesses. Even if something were to go wrong with this model, there are hard assets that can be liquidated to provide distributions to the investors after liabilities are met. Second, we are purchasing and renovating with cash. While we could stretch the real estate portfolio by taking out loans to buy and renovate more property, we have all seen markets change and watched as foreclosures have taken assets. We know that we will have fewer properties with our strategy, but we will also help protect the Fund and its investors from changing markets.
After expenses, profits will be distributed to investors based on their proportional investment into the Fund. Approximately one half of net profits will be distributed directly to investors. The other half will be invested back into the Fund for the purchase and renovation of additional property, or for the buyback of investments from investors who would like to exit the Fund. Profits will be allocated after accounting for expenses associated with the property, Fund management, and taxes.
There are two potential opportunities to invest more into the Fund:
1) If the Fund has not reached its stated ceiling for investment, or if it expands the potential size of the Fund. For example, if we have not raised the $4.5 million yet, you may still be able to invest more (according to State rules and suitability limitations); or, if we raise all of our $4.5 million this year and decide to apply for a renewal to increase the Fund next year.
2) If other investors would like to sell their interests, then current investors will have the opportunity to purchase them.
The State of California imposes suitability limitations on individual investment into a Direct Public Offering. Some investors may invest up to 10% of their net worth, while others may invest only $500. Please read the Offering Memorandum (coming soon) to see how the limits apply to your circumstance.
Yes, your liability is limited to your investment into the Fund.
1) Location: In a downtown, every street and every block is different. We will select property with the greatest ability to attract great tenants who will attract customers.
2) Price/Cost: We will also purchase based on the price of the property (at or below appraised value), as well as on the cost of renovation and how these factors relate to leasability, lease rates, and a return for our investors.
3) Revitalization: We want to invest in property that will attract great tenants who will further the revitalization of our downtown. Great tenants attract more people, who, in turn, support more downtown businesses. This ensures that our activities will raise the values of our area, not just our property.
This will vary by property. Some properties will be more expensive but need relatively little renovation. Others will be the reverse. Good renovations can increase rent rates and reduce tenant turnover; they can also reduce ongoing maintenance problems.
Investors will be notified that the Fund is active. Negotiations on property will begin immediately.
Until the minimum of $1,000,000 is raised, all of the funds raised will be held in an impound account. If the Fund does not raise this minimum, investors will receive their investments back minus any expenses associated with the impound account.
Downtown Fresno is currently in a depressed state. Because of the extremely low foot traffic, we have low sales, which ultimately determine rent rates. As traffic circulation, visibility and investment occur, we would expect to see foot traffic increase with each new business. We expect that this will ultimately lead to stronger rent rates.
The properties held by FSI will be appraised annually. Each investor’s capital account balance may be adjusted, as appropriate, to reflect changes in the value of the Fund’s assets. As the properties increase in value, the individual capital account values will increase proportionately. They will help to establish a value if membership interests are sold or purchased.
The State of California Department of Business Oversight is the regulatory agency for Direct Public Offerings in California. (THE COMMISSIONER OF BUSINESS OVERSIGHT OF THE STATE OF CALIFORNIA DOES NOT RECOMMEND OR ENDORSE THE PURCHASE OF THESE SECURITIES.)
The common stockholders have the decision-making responsibility for purchase, management or sale of the Fund’s properties. Craig Scharton will be the sole common stockholder at the outset of this Fund.
Craig has been engaged in revitalization for 29 years. He has been the revitalization director for two cities, was the first California Main Street Alliance President, and has assembled investors and managed two landmark buildings in downtown Fresno, where he lives. Craig has also worked for the City of Fresno as a councilmember and as the Director of Downtown and Community Revitalization. He currently own Peeve’s Public House on the Fulton Mall.
Day-to-day decision-making responsibility resides with the manager of the Fund and the common membership holders. Investors will have certain voting rights as described in the Offering Memorandum and in the Operating Agreement.
No, managers will not be able to buy real property in our targeted area outside of this Fund. The manager's interest in downtown Fresno revitalization will be focused specifically on the activities of this Fund.
We will present a quarterly update to investors, as well as a comprehensive annual report. Investors will also be invited to grand openings and other activities relevant to their investment.