Case Study

Barr Systems, Inc.

October, 2010

As we have always disclosed, The Rama Fund, LLC (the “Fund”) has the right to a first look at all of Athas Capital Group, Inc.’s (“Athas”) production. If a deal does not fit within the Fund’s investment parameters or if the Fund is fully invested, then we will offer the investment opportunity to our network of private investors as part of our Separately Managed Account (“SMA”) program. In this case study we outline what we believe is one of the best, if not the best, deal that we have ever funded. Unfortunately for SMA investors, the only way to own a piece of this extremely attractive deal is through membership interests in the Fund. Fortunately for SMA investors (and new investors), the Fund is still accepting new subscriptions.

Loan Metrics:

Loan-to-value ratio:
Loan amount:
Value of collateral:
Lien position:
Other debt:

8.54%

$540,000

$6,323,000

1st lien

$0

Guarantor’s FICO:
Full recourse/personal guarantee:
Guarantor’s net worth:
Note rate:
Term of loan:

761
Yes
$10.9M
11.99%
24 months

Executive Summary:

Our borrower, Barr Systems, Inc. (“Barr”), has owned this building since 1993 and built the property using its own funds. Barr wanted a very low leveraged loan so that it could inject some working capital into its business. The collateral is a pristine office building on 10 acres with another sister lot - also 10 acres - next door that is fully entitled and ready for development.

The Borrower / Narrative:

Barr is in the print management and document delivery software business. Up until May 2006, its primary business operations were the development, sale and support of a legacy software application that supported high volume printing. At the same time, the company was investing in a new R&D software development project as changing technology was making the legacy software less competitive in the market and there were declining sales.

In May 2006, Barr sold 60% of its legacy business to a joint venture partner who was responsible for revamping the legacy application while Barr shifted all of its focus to the new R&D software project. In November 2009, the new R&D project was completed. The elimination of the software developers and the administrative staff in accounting, human resources and information services significantly reduced the operating costs of the company. Furthermore, the joint venture partner has proven successful in revamping the legacy software application, which Barr still owns 40% of.

Why Conventional Financing Was Not an Option:

Barr reported a negative Adjusted Gross Income (“AGI”) on its 2008 and 2009 taxes in the amounts of ($1,730,462) and ($2,035,322), respectively. Also, 100% of our loan proceeds were used as cash-out. In today’s environment, banks prefer to finance purchase transactions or refinance transactions.

How We “Won” the Deal:

We believe we were exclusively retained to procure financing for Barr for the following reasons:

We are willing to fund transactions where the use of proceeds is a cash-out
Unlike traditional banks, we do not look primarily at the borrower’s Debt to Income (“DTI”) ratio, but rather we focus on the property’s Debt Service Coverage (“DSCR”) ratio. Because of this, we were able to get comfortable with this transaction even though the borrower had negative AGI.
Beyond the property’s DSCR, we carefully scrutinize a property’s value and one of our principal underwriting metrics is the Loan to Value (LTV) ratio which is a measure of the equity cushion protecting our invested capital.
We were able to move quickly and processed this transaction from the execution of our LOI to closing in about one month.

Exit Strategy for our Bridge Loan:

Our loan proceeds were used by Barr to fund the marketing and development expenses related to their new software application. Their new product has received a strong reception in the marketplace and the company’s financial projections forecast profitability within 24 months of our loan funding. The company expects to be able to repay our loan through the cash flows it derives from its operations. Additional potential avenues for the exit of our loan are (1) a refinance via conventional sources once the company has demonstrated a positive financial trend, or (2) a sale of part or all the of the subject property.

The Collateral:

Located in Gainesville, FL
4 office buildings with 53,103 heated area square feet, situated on 10 acres
- 50% of total square footage leased by Barr or its joint venture partner
- 38% leased to third parties
- 12% vacancy
10 acres adjacent to the improved real property, fully entitled and ready for development

Pictures of the Subject Property

CASE STUDY

BERRO; as one example of our Fix & Flip Program

November, 2010

As we have always disclosed, The Rama Fund, LLC (the “Fund”) has the right to a first look at all of Athas Capital Group, Inc.’s (“Athas”) production. If a deal does not fit within the Fund’s investment parameters or if the Fund is fully invested, then we will offer the investment opportunity to our network of private investors as part of our Separately Managed Account (“SMA”) program. Below we outline a deal we recently funded as an example of our “fix and flip” bridge loan program.

Executive Summary:

Our borrower is an experienced “fix and flipper.” He has successfully renovated and monetized several properties and in each case he operates as if he were going to live in the subject property himself. His work is high grade and in this instance he purchased the subject property for $360,000 using 100% cash. He then invested $50,000 more of his personal savings into the property and before deciding to utilize a small amount of leverage to help bolster his working capital as his project neared completion.

The Borrower / Narrative:Our borrower has been a firefighter for the past 21 years and throughout his adult life he has been an astute investor. He has accumulated a real estate portfolio valued at $4,655,000 with only $84,750 of debt against it (our bridge loan). His credit is flawless and boasts a 797 FICO score. Additionally, he earns $200,000 a year from his occupation.

Why Conventional Financing Was Not an Option:The subject property was in substandard condition and banks will not lend on that kind of collateral.

How We “Won” the Deal:

We were very quick to close this transaction and had money in the borrower’s hands in less than two weeks. Additionally, we enjoy an established relationship with the mortgage broker who brought us this deal, having funded many loans for his clients over the past several years.

The broker that brought us this deal, we have serviced the needs of his clients for years thus we are a trusted source.

Exit Strategy for our Bridge Loan:The rehab work is complete and the subject property is currently listed for $655,000. It is anticipated that this property will sell within 3 months.

The Collateral: