HALL Group

HSF disclosed that across its 20-year track record, one loan (originated in 2006) resulted in a loss of a portion of the principal balance. Additionally, the Prescott Hotel (an 82-room hotel in Prescott, Arizona) was sold in 2015 at a loss after recording a $286,806 impairment charge, recognized as discontinued operations.

“Included in HSF's Track Record, and the results noted above, are three instances in which ownership of a collateral property was obtained by us or the applicable predecessor in interest entity (through foreclosure, deed in lieu, or otherwise). In two of those instances a positive overall IRR was realized, and in only one instance, going back to a loan originated in 2006, a loss of a portion of the principal balance was recognized.”

The fund's success is substantially dependent on its management team. Loss of key individuals could adversely affect performance, and there is no obligation to liquidate or terminate operations if key personnel depart.

“Our success is substantially dependent on the management team and its ability to identify and consummate suitable Financings, to improve the operating performance of existing Financings and, if necessary, to dispose of investments at a profit. Should one or more of these individuals become incapacitated or in some other way cease to be part of the management team, our performance could be adversely affected.”

Bank Loans have historically been guaranteed by affiliated entities Hall Phoenix Inwood, Ltd. and Search Financial Services, LP, both controlled by the majority shareholder. These affiliates may not be willing to continue guaranteeing future Bank Loans, which could make obtaining Bank Loans more difficult or impossible.

“Historically, the Bank Loans have been guaranteed in whole or in part by affiliated entities, Hall Phoenix Inwood, Ltd. ('HPI') and Search Financial Services, LP ('Search'), both of which are controlled by the majority shareholder of our sole member (the 'Majority Shareholder'), and in certain instances by the Majority Shareholder. While not anticipated at this time, HPI, Search, and the Majority Shareholder may not be willing to continue to guarantee future Bank Loans or other debt of the Company.”