- Investments have recurring revenue streams that are proven, scalable, and projectable with reasonable certainty based on prior operating results. Financial engineering (e.g., debt) is not the driver of returns – solid management experience, a unique value proposition, and revenue and profit margin growth is the driver of returns. We will target 3x-5x returns with acceptable risk. The use of funds is growth capital.
- Investments will be of a project finance nature and are led by long-standing experts in their industry. Examples of this include commercial real estate development projects, energy projects, etc. Debt will be used for construction or initial CapEx, forecasted cash flows are positive, and while an exit is expected within X years, a delayed exit is protected on the downside by positive cash flow from the project. We will target 2x-3x returns with low risk. An example of this is a 300 door apartment complex in a smaller city like Oklahoma City and a developer with a 25-year track record.
In most cases, deals we participate in are sponsored by Members who will have a management, affiliate, or advisory role in the venture post-investment (e.g., a Member brings a deal to NEC that they are personally investing in, or one in which they are a member of the Board). In all cases, sponsoring Members are investing personally in the deal. Some investments may have unique tax benefits for Members (e.g., near-term passive losses or tax deductions), but all investments must meet threshold return objectives regardless of the tax benefits.