FORM OF INVESTMENT ADVISORY AGREEMENT BETWEEN NORTHSTAR REAL ESTATE CAPITAL INCOME MASTER FUND AND NSAM B-RECF LTD.
Exhibit 99(g)(2)
FORM OF
BETWEEN
NORTHSTAR REAL ESTATE CAPITAL INCOME MASTER FUND
AND
NSAM B-RECF LTD.
This Investment Advisory Agreement (this "Agreement") is made as of , 2016, by and between NORTHSTAR REAL ESTATE CAPITAL INCOME MASTER FUND, a Delaware statutory trust (the "Company"), and NSAM B-RECF Ltd., a Bermuda exempted limited company (the "Advisor").
INVESTMENT ADVISORY SERVICES
1. Investment Advisory Duties of the Advisor.
(i) the investment objectives, strategies, policies and restrictions that are set forth in the Company's offering document on Form N-2 filed with the Securities and Exchange Commission (the "SEC"), as amended from time to time (the "Offering Statement"), the Company's prospectus that forms a part of the Offering Statement, as amended and
supplemented (the "Prospectus"), and/or the Company's periodic reports filed with the SEC from time to time;
(ii) during the term of this Agreement, all other applicable federal and state laws, rules and regulations, and the Company's declaration of trust (the "Declaration of Trust") and bylaws (the "Bylaws"), in each case as may be amended from time to time;
(iii) such investment policies, directives, regulatory restrictions as the Company may from time to time establish or issue and communicate to the Advisor in writing; and
(iv) the Company's compliance policies and procedures as applicable to the Advisor and as administered by the Company's chief compliance officer.
(i) determine the composition and allocation of the Company's investment portfolio, the nature and timing of any changes therein and the manner of implementing such changes;
(ii) establish and maintain criteria to identify, evaluate and negotiate the structure of the Company's investments;
(iii) perform due diligence on prospective investments;
(iv) execute, close, service and monitor the Company's investments;
(v) perform, oversee and supervise the various management and operational functions relating to the Company's investments, including any subsidiaries or joint ventures;
(vi) determine the securities and other assets that the Company shall purchase, retain or sell; and
(vii) provide the Company with such other investment advisory, research and related services as the Company may, from time to time, reasonably request or require for the investment of its funds.
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Company through a subsidiary (each, a "Subsidiary"), the Advisor shall have the authority to (i) create, or arrange for the creation of, such Subsidiary, (ii) manage the Subsidiary and its investments, and, to the extent necessary, enter into a separate investment advisory agreement with such Subsidiary, (iii) create, or arrange for the creation, of special purpose vehicles through which the Subsidiary may invest and (iv) take any other actions with respect the Subsidiary that the Advisor deems, in its sole discretion, appropriate. If it is necessary for the Advisor to make investments on behalf of the Company through a special purpose vehicle, either directly or through a Subsidiary, the Advisor shall have authority to create, or arrange for the creation of, such special purpose vehicle and to make investments through such special purpose vehicle in accordance with applicable law. The Company also grants to the Advisor power and authority to engage in all activities and transactions (and anything incidental thereto) that the Advisor deems, in its sole discretion, appropriate, reasonably necessary or advisable to carry out its duties pursuant to this Agreement.
(i) The Advisor shall be responsible for any compensation payable to any Co-Advisor; provided, however, that the Advisor may direct the Company to pay directly to the Co-Advisor the amounts due and payable to such Co-Advisor from the fees and expenses payable to the Advisor under this Agreement.
(ii) Any Co-Advisory Agreement entered into by the Advisor shall be in accordance with the requirements of the 1940 Act, the Advisers Act, any other applicable federal securities law, the Companies Act of 1981 and any other applicable Bermudian law, and any other applicable law whether domestic or foreign.
(iii) Any Co-Advisor shall be subject to the same fiduciary duties as are imposed on the Advisor pursuant to this Agreement, the 1940 Act and the Advisers Act, as well as other applicable federal and state law, taking into account any limitations of the scope of responsibilities of such Co-Advisor.
(iv) Any Co-Advisor shall be registered with the SEC as an investment adviser under the Advisers Act prior to the applicable Co-Advisory Agreement becoming effective pursuant to Section 15(a) of the 1940 Act.
(v) In the event that the terms and provisions of any Co-Advisory Agreement related to the rights, responsibilities and obligations of the Co-Advisor conflict with this Agreement, the terms of the Co-Advisory Agreement shall prevail.
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2. Expenses Payable by the Company.
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expenses of any trustees of the Company who are not affiliated persons (as defined in the 0000 Xxx) of the Advisor or a Co-Advisor; costs of proxy statements, shareholders' reports and notices; fidelity bond, trustees and officers/errors and omissions liability insurance and other insurance premiums; direct costs such as printing, mailing, long distance telephone and staff costs; fees and expenses associated with independent audits and outside legal costs, including compliance with the Xxxxxxxx-Xxxxx Act of 2002; costs associated with the Company's reporting and compliance obligations under the 1940 Act and applicable federal and state securities laws; brokerage commissions for the Company's investments; and all other fees and expenses incurred by the Advisor or the Company in connection with administering the Company's business, including all fees and expenses incurred by the Advisor in performing its obligations under this Agreement and the reimbursement of the allocable portion of the compensation of the Company's chief financial officer, chief compliance officer and administrative support, to the extent they are not controlling persons of the Advisor or any of its affiliates, subject to the limitations included in this Agreement.
Prior to the effective date of this Agreement, the Advisor, either directly or through its affiliates, will bear Organization and Offering Expenses on behalf of the Company. Upon such time that this Agreement becomes effective pursuant to Section 15(a), the Advisor will be entitled to receive reimbursement from the Company and the Company will be liable to pay the Advisor for Organization and Offering Expenses that the Advisor has paid on behalf of the Company, either directly or through its affiliates (the "Reimbursable O&O Expenses"), until all of the Organization and Offering Expenses incurred and/or paid by the Advisor or its affiliates have been recovered, subject to any expense limitation agreement and/or applicable regulatory limitations.
Under the terms of this Agreement, the Advisor and certain of its affiliates will become entitled to receive reimbursement for any future offering or organization costs incurred, subject to any expense limitation agreement and/or applicable regulatory limitations.
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base management fee will be payable quarterly in arrears and will be calculated based on the average value of the Company's gross assets at the end of the two most recently completed calendar quarters (and, in the case of our first quarter, our gross assets as of such quarter-end). The base management fee may or may not be taken in whole or in part at the discretion of the Advisor. All or any part of the base management fee not taken as to any quarter will be deferred without interest and may be taken in such other quarter as the Advisor will determine. The base management fee for any partial month or quarter will be appropriately prorated.
For purposes of this fee, "Adjusted Capital" shall mean the sum of (i) cumulative gross proceeds generated from issuances of the Shares (including the Company's distribution reinvestment plan), less (ii) distributions to investors that represent a return of capital and amounts paid for share repurchases pursuant to the Company's share repurchase program.
For purposes of computing the Incentive Fee, the calculation methodology will look through derivatives or swaps as if the Company owned the reference assets directly. Therefore, net interest, if any, associated with a derivative or swap (which represents the difference between (i) the interest income and fees received in respect of the reference assets of the derivative or swap and (ii) the interest expense paid by the Company to the derivative or swap counterparty) will be included in the calculation of quarterly pre-incentive fee net investment income for purposes of the Incentive Fee.
The calculation of the Incentive Fee for each quarter is as follows:
Β· | No Incentive Fee shall be payable to the Advisor in any calendar quarter in which the Company's pre-incentive fee net investment income does not exceed the preferred return rate of 1.75% (7.00% annualized) (the "Preferred Return") on Adjusted Capital. |
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Β· | 100% of the Company's pre-incentive fee net investment income, if any, that exceeds the Preferred Return, but is less than or equal to 2.1875% in any calendar quarter (8.75% annualized) shall be payable to the Advisor. This portion of the Company's pre-incentive fee net investment income is referred to as the "catch-up." The "catch-up" provision is intended to provide the Advisor with an incentive fee of 20.0% on all of the Company's pre-incentive fee net investment income in any calendar quarter when the Company's pre-incentive fee net investment income reaches 2.1875% in such calendar quarter (8.75% annualized). |
Β· | 20.0% of the amount of the Company's pre-incentive fee net investment income, if any, that exceeds 2.1875% in any calendar quarter (8.75% annualized) shall be payable to the Advisor once the Preferred Return is reached and the catch-up has been achieved (20.0% of the Company's pre-incentive fee net investment income thereafter shall be allocated to the Advisor). |
5. Brokerage Commissions; Front End Fees.
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portfolio, and is consistent with the Advisor's duty to seek the best execution on behalf of the Company. Notwithstanding the foregoing, with regard to transactions with or for the benefit of the Company, the Advisor may not pay any commission or receive any rebates or give-ups, nor participate in any business arrangements which would circumvent this restriction.
ADMINISTRATIVE SERVICES
6. Administrative Duties of the Advisor.
(i) provide the Company with clerical, bookkeeping, accounting and recordkeeping services, legal services, and shall provide all such other administrative services as the Administrator and the Company shall from time to time determine to be necessary or useful to perform its obligations under this Agreement;
(ii) on behalf of the Company, enter into agreements and/or conduct relations with custodians, depositories, transfer agents, distribution payment agents, shareholder servicing agents, accountants, auditors, tax consultants, advisers and experts, investment advisers, compliance officers, escrow agents, attorneys, dealer-managers, brokers and dealers, investor custody and share transaction clearing platforms, marketing, sales and advertising materials contractors, public relations firms, investor communication agents, printers, insurers, banks, independent valuation firms, and such other persons in any such other capacity deemed to be necessary or desirable by the Advisor and the Company;
(iii) have the authority, subject to the approval of the Board of Trustees, to enter into, among the Company and a third-party, one or more administration agreements, pursuant to which the Company may obtain certain administrative services, and for which the Company may pay a separate fee;
(iv) make reports to the Board of Trustees of the performance of its obligations under this Section 6;
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(v) furnish advice and recommendations with respect to such other aspects of the administration of the Company's business and affairs as the Advisor reasonably shall determine to be desirable;
(vi) assist the Company in the preparation of the financial and other records that the Company is required to maintain and the preparation, printing and dissemination of reports that the Company is required to furnish to shareholders, and reports and other materials filed with the SEC, and states and jurisdictions where any offering of the Company's Shares or other securities is registered or otherwise reported and there is a duty to file information with one or more states on an ongoing basis;
(vii) monitor the Company's compliance with the asset coverage requirements of Section 18 of the 1940 Act and the applicable requirements of the Internal Revenue Code of 1986, as amended (the "Code");
(viii) monitor each Subsidiary's compliance with the applicable requirements of the Code;
(ix) assist the Company in determining and publishing the Company's net asset value in accordance with the Company's policy as adopted from time to time by the Board of Trustees, oversee the preparation and filing of the Company's tax returns, and generally oversee and monitor the payment of the Company's expenses; and
(x) oversee the performance of administrative and other professional services rendered to the Company by others.
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among the parties hereto for the provision of services to the Company. Except as may be required in carrying out this Agreement, confidential information under this Section 8 shall not be disclosed to any third party, without the prior consent of such providing person, except that such confidential information may be disclosed to an affiliate or agent of the disclosing person to be used for the sole purpose of rendering services pursuant to this Agreement or any other agreement between or among the parties hereto for the provision of services to the Company. The foregoing shall not be applicable to any information that is publicly available when provided or thereafter becomes publicly available other than through a breach of this Agreement, or that is required to be disclosed to any regulatory authority, by judicial or administrative process or otherwise by applicable law or regulation.
(a) trust and organizational expenses relating to borrowings and offerings of the Shares and the Company's other securities and incurrences of indebtedness, subject to limitations included in this Agreement;
(b) the cost of calculating the Company's net asset value, including the cost and expenses of any third-party valuation services;
(c) the cost of effecting sales and repurchases of the Shares and any other securities of the Company;
(d) expenses incurred by the Advisor or any affiliate thereof payable to third parties, including agents, consultants or other advisors (such as accountants and legal counsel);
(e) fees payable to third parties relating to, or associated with, making, monitoring and disposing of investments, and valuing investments and enforcing contractual rights, including fees and expenses associated with performing due diligence reviews of prospective investments;
(f) professional fees relating to investments, including expenses of consultants, investment bankers, attorneys, accountants and other experts;
(g) fees payable to third parties relating to, or associated with, making, monitoring, servicing and disposing of a Subsidiary's investments, and valuing investments and enforcing contractual rights, including fees and expenses associated with performing due diligence reviews of prospective investments for a Subsidiary;
(h) fees, expenses, and costs relating to or associated with software tools, programs or other technology (including risk management software, fees to risk management services providers, third-party software licensing, implementation, data management and recovery services and custom development costs);
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(i) research and market data (including news and quotation equipment and services, and any computer hardware and connectivity hardware (e.g., telephone and fiber optic lines) incorporated into the cost of obtaining such research and market data);
(j) all costs and charges for equipment or services used in communicating information regarding the Company's transactions among the Advisor and any custodian or other agent engaged by the Company
(k) all costs associated with the provision of information technology services;
(l) federal and any state registration or notification fees;
(m) the costs of preparing, printing and mailing reports and other communications, including tender offer correspondence, proxy statements, shareholder reports and notices or similar materials, to shareholders;
(n) interest payable on debt, if any, incurred to finance the Company's investments;
(o) transfer agent and custodial fees;
(p) fees and expenses associated with the Company's marketing efforts (including travel and attendance at investment conferences and similar events);
(q) all costs of registration and listing the Company's securities on any securities exchange;
(r) federal, state and local taxes;
(s) fees and expenses of Independent Trustees (as defined below);
(t) overhead costs, including rent, office supplies, utilities and capital equipment;
(u) costs of preparing and filing reports or other documents required by the SEC or any other governmental agency;
(v) costs of fidelity bond, trustees and officers/errors and omissions liability insurance and other insurance premiums;
(w) direct costs and expenses of administration, including those relating to printing, mailing, long distance telephone, copying, secretarial and other and staff, independent auditors and outside legal costs;
(x) fees and expenses associated with independent audits, outside legal costs, and tax returns, including compliance with the Xxxxxxxx-Xxxxx Act of 2002, the 1940 Act and applicable federal and state securities laws;
(y) internal legal expenses (including those expenses associated with preparing the Company's public filings, attending and preparing for board meetings, as applicable, and generally serving as counsel to the Company)
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(z) costs associated with the Company's reporting and compliance obligations under the 1940 Act and applicable federal and state securities laws, including the cost of third-party service providers and any compliance program audit programs;
(aa) brokerage commissions for the Company's investments;
(bb) computer software specific to the business of the Company;
(cc) any unreimbursed expenses incurred in connection with transactions not consummated;
(dd) the costs of responding to regulatory requests;
(ee) routine non-compensation overhead expenses of the Advisor and or any affiliate thereof in connection with administering the Company's business;
(ff) all other expenses incurred by the Company or the Advisor, or by any affiliate thereof that the Advisor has arranged to provide services to the Company, in connection with the administration of the Company's business, including expenses incurred by the Advisor or any affiliate thereof in performing the Advisor's obligations under this Agreement and the reimbursement of the allocable portion of the compensation of the Company's chief financial officer, chief compliance officer and administrative support staff attributable to the Company, to the extent that they are not a person with a controlling interest in the Advisor or any of its affiliates, subject to the limitations included in this Agreement, as applicable; and
(gg) any expenses incurred outside of the ordinary course of business, including, without limitation, costs incurred in connection with any claim, litigation, arbitration, mediation, government investigation or similar proceeding and indemnification expenses as provided for in the NorthStar Real Estate Capital Income Fund's and the Company's respective organizational documents.
10. No Fee; Reimbursement of Expenses; Limitations on Reimbursement of Expenses.
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Agreement, on behalf of the Company; provided, however, the reimbursement shall be an amount equal to the lower of the Advisor's or the affiliate's actual cost or the amount the Company would be required to pay third parties for the provision of comparable administrative services in the same geographic location; and, provided, further, that such costs are reasonably allocated to the Company on the basis of assets, revenues, allocations or other reasonable methods. The Company may also agree to reimburse the Advisor under this Agreement, whereby the Advisor, or an affiliate of the Advisor, shall provide certain administrative services for the Company, for the salaries, rent and travel expenses of executive officers of the Advisor also serving in the capacity of chief financial officer or chief compliance officer of the Company provided such reimbursement is approved annually by a majority of the Independent Trustees (as defined below). The Advisor shall prepare a statement documenting the expenses of the Company and the calculation of the reimbursement and shall deliver such statement to the Company prior to full reimbursement.
12. Other Activities of the Advisor.
Subject to all applicable law, the services of the Advisor to the Company are not exclusive, and the Advisor may engage in any other business or render similar or different services to others including, without limitation, the direct or indirect sponsorship or management of other investment-based accounts or commingled pools of capital, however structured, having investment objectives similar to or different from those of the Company, and nothing in this Agreement shall limit or restrict the right of any manager, partner, member (including its members and the owners of its members), officer or employee of the Advisor to engage in any other business or to devote his or her time and attention in part to any other business, whether of a similar or dissimilar nature, or to receive any fees or compensation in connection therewith. The Advisor assumes no responsibility under this Agreement other than to render the services called for hereunder. It is understood that trustees, officers, employees and shareholders of the Company are or may become interested in the Advisor and its affiliates, as trustees, officers, employees, partners, shareholders, members, managers or otherwise, and that the Advisor and trustees, officers, employees, partners, shareholders, members and managers of the Advisor and its affiliates are or may become similarly interested in the Company as shareholders or otherwise.
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member, officer or employee of the Advisor or under the control or direction of the Advisor, even if paid by the Advisor.
14. Indemnification; Limitation of Liability.
The Company agrees to indemnify and hold harmless the Advisor, its Affiliates and each Control Person of the Advisor (each a "Indemnified Party") against all losses, damages, costs and expenses, together with all legal (including reasonable attorney's fees) and other expenses (collectively, "Losses") reasonably incurred by an Indemnified Party with respect to (i) any matter with respect to the operations of the Company, the services of the Advisor or any Affiliate of the Advisor under this Agreement or the services of the Advisor or the Co-Advisor under the Co-Advisory Agreement and the services of any other person appointed by the Advisor, Co-Advisor or retained by the Company to provide services to the Company, other than liabilities occurring as a result of the Advisor's willful misfeasance, bad faith, gross negligence or reckless disregard of its duties hereunder, or (ii) any untrue statement of a material fact (or an omission of such statement) contained in any Prospectus, Offering Statement, proxy materials, reports, advertisements, sales literature or other materials pertaining to the Company, unless such statement was made in reliance on and in conformity with written information furnished to the Company and the Co-Advisor by the Advisor for use therein.
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Notwithstanding the foregoing, in no case shall the Company's indemnity hereunder be inconsistent with the laws of the State of Delaware or the Declaration of Trust. Notwithstanding anything set forth in this Section 14 to the contrary, nothing contained herein shall protect or be deemed to protect the Indemnified Parties against or entitle or be deemed to entitle the Indemnified Parties to indemnification in respect of any liability to the Company or its shareholders to which the Indemnified Parties would otherwise be subject by reason of willful misfeasance, bad faith or gross negligence in the performance of the Advisor's duties or by reason of the reckless disregard of the Advisor's duties and obligations under this Agreement (to the extent applicable, as the same shall be determined in accordance with the 1940 Act and any interpretations or guidance by the SEC or its staff thereunder).
15. Effectiveness, Duration and Termination of Agreement.
(c) Payments to and Duties of Advisor Upon Termination.
(i) After the termination of this Agreement, the Advisor shall not be entitled to compensation for further services provided hereunder except that it shall be entitled to receive from the Company within 30 days after the effective date of such termination all unpaid reimbursements and all earned but unpaid fees payable to the Advisor prior to termination of this Agreement, including any deferred fees.
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(ii) The Advisor shall promptly upon termination:
(A) deliver to the Board of Trustees a full accounting, including a statement showing all payments collected by it and a statement of all money held by it, covering the period following the date of the last accounting furnished to the Board of Trustees;
(B) deliver to the Board of Trustees all assets and documents of the Company then in custody of the Advisor; and
(C) cooperate with the Company to provide an orderly transition of services.
To the Board or the Company:
NorthStar Real Estate Capital Income Master Fund
000 Xxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
To the Advisor:
NSAM B-RECF Ltd. c/o NorthStar Asset Management Group, Ltd
00 Xxxxxxxx Xxxx
Xxxxxxxx XX 00
Xxxxxxx
Xxxxxx party may at any time give notice in writing to the other party of a change in its address for the purposes of this Section 16.
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be executed by any of the parties hereto, this Agreement shall be construed in accordance with the laws of the State of New York. For so long as the Company is regulated as a registered investment company under the 1940 Act and the Advisor is regulated as an investment adviser under the Advisers Act, this Agreement shall also be construed in accordance with the applicable provisions of the 1940 Act and the Advisers Act, respectively, and any other then-current regulatory interpretations thereunder. To the extent the applicable laws of the State of New York, or any of the provisions herein, conflict with the provisions of the 1940 Act, the latter shall control.
21. The NorthStar Name. NorthStar Asset Management Group Inc. ("NSAM") and its affiliates have a proprietary interest in the name "NorthStar." NSAM hereby grants to the Company a non-transferable, non-assignable, non-exclusive royalty-free right and license to use the name "NorthStar" during the term of this Agreement. Accordingly, and in recognition of this right, if at any time the Company ceases to retain the Advisor or one of its affiliates to perform advisory services for the Company, the Company will, promptly after receipt of written request from NSAM, cease to conduct business under or use the name "NorthStar" or any derivative thereof and the Company shall change its name and the names of any of its subsidiaries to a name that does not contain the name "NorthStar" or any other word or words that might, in the reasonable discretion of NSAM, be susceptible of indication of some form of relationship between the Company and NSAM or any its affiliates. At such time, the Company will also make any changes to any trademarks, servicemarks or other marks necessary to remove any references to the word "NorthStar." Consistent with the foregoing, it is specifically recognized that NSAM or one or more of its affiliates has in the past and may in the future organize, sponsor or otherwise permit to exist other investment vehicles (including vehicles for investment in real estate loans, real estate-related debt securities and other real estate assets) and financial and service organizations having "NorthStar" as a part of their name, all without the need for any consent (and without the right to object thereto) by the Company. NSAM shall govern the Company's use of the name "NorthStar" and the Company's use of the "NorthStar" name will be in strict accordance with any quality standards and specifications that may be established by Advisor and communicated to Company from time to time.
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NORTHSTAR REAL ESTATE CAPITAL INCOME MASTER FUND, a Delaware statutory trust | |||
By: | |||
Name: | |||
Title: | |||
NSAM B-RECF LTD., a Bermuda exempted limited company | |||
By: | |||
Name: | |||
Title: |
[Signature Page to Master Fund
Advisory Agreement]