0 0

Torchlight Investors March 2018

1 1

Disclaimer

The information contained within is intended for one-on-one discussion purposes only, is subject to clarification during such

discussion, and may not be relied upon for any other purpose. The information contained herein is confidential.

This is not an offer to sell or a solicitation to buy any security, investment product or any advisory service, nor do these materials constitute

investment advice. Investments in our sponsored funds are offered pursuant to prospectuses or other offering memoranda that are available

from us upon request. Those documents contain important information about a fund’s investment risks, fees and expenses and should be

reviewed carefully in connection with any decision to invest. Any reproduction or use of this information in whole or in part, is prohibited other

than with prior written approval of Torchlight Investors, LLC (“Torchlight Investors” or “Torchlight”).

Nothing contained herein shall be relied upon as a representation as to future performance. The information set forth herein includes estimates,

projections and significant elements of subjective judgment and analysis which Torchlight believed to be reasonable when made. No

representations are made as to the accuracy of such estimates or projections or that all assumptions relating to such estimates or projections

have been considered or stated or that such estimates or projections will be realized. Prior investment returns are not indicative of future

performance. Information presented herein is based in part on information obtained from third parties that Torchlight has not independently

verified.

Certain information discussed in this presentation, including references to estimated investment returns, constitutes forward-looking statements

within the meaning of U.S. federal securities law. Although Torchlight believes that the expectations reflected in such forward-looking

statements are based on reasonable assumptions, it can give no assurance that its expectations will be achieved. Among other matters,

Torchlight has made various assumptions regarding interest rates, market cycles, default rates, commercial real estate fundamentals and

correlations among them. Forward-looking information is subject to certain risks, trends and uncertainties that could cause actual results to

differ materially from those predicted. In particular, no assurance can be offered that any estimated investment return expectation will be

achieved or that any referenced investment strategy will be implemented successfully. This presentation is intended to be viewed solely by a

sophisticated investor who has, or together with the investor’s professional adviser, has significant experience in real estate-related assets. Any

person reviewing this presentation is encouraged to discuss the limitations of this presentation, especially those relating to Torchlight’s

assumptions and relevant risks and uncertainties, both with Torchlight’s representatives and any professional advisers retained by the reviewer.

The information contained herein supersedes all previous such information received by you and may be superseded by information received by

you thereafter. Torchlight undertakes no obligation to update these materials.

2 2

Disclaimer

The Torchlight Base Case and Downside scenarios are based upon assumptions and analysis regarding future events and conditions as

described below. The Base Case assumes the economic environment, credit markets and real estate fundamentals remain fundamentally

unchanged. The Downside scenario is not intended as a worst case scenario but rather is based on projections, estimates and assumptions

that are less favorable than Torchlight’s Base Case assumptions. The Downside Case assumes that the investments are held until maturity.

Actual performance can be lower than the Downside scenario.

The market values of publicly traded securities are based on information from one or more of the following sources: quotations from dealers,

third party pricing services and market transactions of comparable securities. The market values of private assets are based on a methodology

which uses comparable market data specific to the underlying loans and properties such as market capitalization rates, market rents, vacancy

levels, etc. To the extent an asset is illiquid or otherwise difficult to value, we may apply our judgment and in reaching a valuation. Such values

may differ from the values that would have been determined had a broader market for the assets existed and the differences could be material.

Performance of specific assets is presented on a gross basis without taking into account the effect of fund-level management and incentive

fees, or other fund-level expenses. Had such other expenses been included, the indicated returns would be lower. Additional information on fees

are described in Torchlight’s Form ADV and in the offering documents of the fund.

Projections are based upon certain assumptions and analysis regarding future spreads, default rates, interest rates, market trends and industry

trends, as well as factors relating to specific assets, such as an individual property’s most recent operating statements and lease rollover

information. Reviews of individual assets are used to adjust baseline assumptions made by Torchlight regarding cap rates, rental rates and

vacancy rates among different property types. In the analysis Torchlight may consider the likelihood and severity of mortgage default,

extensions of maturity and future investment activity.

Actual returns of investors may be materially lower than those projected depending upon the extent and manner in which actual market,

economic and asset specific conditions vary from Torchlight assumptions. Projections involve known and unknown risks, uncertainties and

other factors, and undue reliance should not be placed thereon. Projections are inherently subjective and may be based on information that has

been obtained from third-party sources and has not been verified by Torchlight. There can be no assurance that the projected performance will

ultimately be achieved by the Torchlight funds or specific assets.

Torchlight makes no representation or warranty as to the future performance of any funds or investments. Information contained herein is

necessarily illustrative and summary in nature and is not intended to predict actual results, which will differ, and may differ substantially, from

the projections herein. Additional information related to the methodology used herein, or the specific positions in the portfolio, will be provided

upon request.

Scenario Assumptions

3 3

Presenter Biographies

Michael Romo – Partner, Investor Relations and Business Development

Mike is a Partner in the investor relations group as well as a member of the Operating Committee.

He has 24 years of professional experience. Prior to Torchlight, Mike worked at Hawkeye Partners

and Giuliani Partners. At Hawkeye Partners, Mike served as a member of the Management and

Investment Committees in addition to his responsibilities as head of sourcing for new managers

and marketing. Mike holds a BBA in Finance from Southern Methodist University.

Daniel Heflin – Partner, Chief Executive Officer and Co-Chief Investment Officer

Dan is a Partner, Chief Executive Officer and a co-Chief Investment Officer as well as a member

of the Investment and Operating Committees. Dan is the Founder of Torchlight and has 30 years

of professional experience. Prior to Torchlight, Dan worked at Ocwen Financial Corporation,

Credit Suisse and Arthur Andersen LLP. While with Arthur Andersen, Dan received his Certified

Public Accountant license in the State of New York. He holds an MS from the London School of

Economics and Political Science and a BS from Texas Christian University.

4 4

Firm Overview

Torchlight History

The Institutional Fund Launches include includes only products for institutional investors. Excluded are certain funds and accounts managed by Torchlight that have an investment strategy tailored for a particular investor

or have not accepted investment from unaffiliated investors. Less than 0.5% of Torchlight is owned by a former colleague.

Ins

titu

tio

na

l F

un

d L

au

nch

es Opportunity Fund II

(2006)

Long Only Income Fund

(1995)

Liquid Long Only Fund

(1996 – 2006)

Long/Short CMBS Fund

(2005 – 2014)

Opportunity Fund I

(2003 – 2006)

Short Only CMBS Fund

(2005 – 2008)

Opportunity Fund III

(2008)

Opportunity Fund IV

(2012)

Opportunity Fund V

(2015)

1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017

Opportunity Fund VI

(2017)

• 1995: Company is founded

• 1998: Special Servicing platform is formed

• 2002: ING purchases a minority equity stake

• 2010: Management buys back ING stake

• Present: Torchlight is 100% employee owned

• $3.9 billion under management across the spectrum of

U.S. commercial real estate strategies

• Investment Types:

○ Mortgages and mezzanine loans

○ Preferred equity

○ Equity

○ CMBS

Investments

5

Firm Organization

Investment Management

• Acquisitions

• Deal Structuring

• Portfolio Management

• Risk Management

Asset Management & Credit

• Credit Underwriting

• Business Plan Development

and Execution

• Loan Workout

• Management of Equity

Real Estate

Financial Control

• Accounting

• Compliance

• Cash Management

• Operations

• Human Resources

Investor Relations

• Relationship Management

• Client Reporting

• Business Development

Investment Committee

Gregory Dineen

Chief Credit Officer

•Joined Torchlight in 2016

•15 years of experience

•BS, Villanova University, 2002

Gianluca Montalti

Partner,

Head of Asset Management

•Joined Torchlight in 2009

•20 years of experience

•MBA, University of Chicago, 2002

•BBA, University of Michigan, 1995

Samuel Chang

Partner,

Investment Management

•Joined Torchlight in 1998

•19 years of experience

•BS, Columbia University, 1998

•Commercial Real Estate Finance

Council

Marc Young

Partner,

Co-Chief Investment Officer

•Joined Torchlight in 2008

•24 years of experience

•MBA, Temple University, 1992

•BS, Pennsylvania State University,

1990

Daniel Heflin

Partner, Chief Executive Officer,

Co-Chief Investment Officer

•Founded Torchlight in 1995

•30 years of experience

•Certified Public Accountant

•MS, London School of Economics,

1992

•BS, Texas Christian University, 1986

6

Since October 1981, federal debt has increased from $1 trillion to over $20 trillion…

and more than $11 trillion is due to mature over the next 7 years

Creation of Structural Issues

As of 12/31/17

Historical data is not adjusted for inflation.

Sources: Bloomberg, Congressional Budget Office, U.S. Department of the Treasury, Bureau of the Fiscal Service

U.S. Federal Debt and 10-Year Treasury Yield

(January 1965 through December 2027)

-1%

1%

3%

5%

7%

9%

11%

12%

14%

16%

18%

20%

1965

1968

1971

1974

1977

1980

1983

1986

1989

1992

1995

1998

2001

2004

2007

2010

2013

2016

2019

2022

2025 $0

$3

$6

$9

$12

$15

$18

$21

$24

$27

$30

$33

10-Y

ear

Tre

asury

Yie

ld

Federa

l D

ebt

($T

rilli

ons)

Outstanding U.S. Federal Debt Amount 10-Year Treasury Yield

CBO Forecast

Federal debt averages 40% of GDP

104% of GDP

7 7

Real estate prices have surpassed peak prices

Commercial Real Estate Pricing

Commercial Construction and

Development Loans Held by U.S. Banks (September 2001 through December 2017)

Represents the 3 month moving average of the apartment, industrial, office and retail cap rate

data as provided by Real Capital Analytics

Cumulative Change in Property Index Values (December 2000 through December 2017)

80

160

240

320

400

480

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Ind

ex (

12/3

1/2

000 =

100)

NCREIF NPI CPPI Non-Gateway Cities

Sources: Bloomberg, Real Capital Analytics

$150

$250

$350

$450

$550

$650

Dec-0

1

Dec-0

2

Dec-0

3

Dec-0

4

Dec-0

5

Dec-0

6

Dec-0

7

Dec-0

8

Dec-0

9

Dec-1

0

Dec-1

1

Dec-1

2

Dec-1

3

Dec-1

4

Dec-1

5

Dec-1

6

Dec-1

7

$ B

illio

ns

$338.3 B

Dec 2017

$631.8 B

Mar 2008

8

The recovery of the CMBS market has been marked by improved credit characteristics

Conservative Underwriting Standards

Commercial Mortgage Credit Characteristics (Conduit CMBS loans, weighted average at issuance)

All information is as of December 31, 2017.

Source: Trepp, Morgan Stanley

2007 2017

Reported DSCR 1.40 2.19

Reported Debt Yield 9.0% 10.9%

LTV 69.5% 56.9%

9

Constrained Lending and Near Term Maturities

$0

$50

$100

$150

$200

$250

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

$ B

illio

ns

2017 CMBS issuance volume is as of January 9, 2018.

Source: Commercial Mortgage Alert

CMBS Issuance (January 2001 through December 2017)

CMBS new issuance remains below peak levels, while $1.8 trillion in potential loan maturities

are projected to require refinancing in the next 5 years

Cumulative Commercial Mortgage

Loan Maturity Schedule (January 2018 through December 2022)

Source: Trepp

$0

$400

$800

$1,200

$1,600

$2,000

2018

2019

2020

2021

2022

$ B

illio

ns

10 10

Torchlight Debt Opportunity Fund VI

Opportunity

• Market imbalance has created opportunity for attractive risk-adjusted returns in commercial real estate

• Supply in most property types remains below peak levels

• $1.8 trillion in potential loan maturities

• Funding for transitional non-core assets remains constricted

Strategy

• Target investments in commercial real estate, including senior and mezzanine loans, commercial

mortgage backed securities, and other real estate related investments

• Prudent leverage: maximum fund-level leverage ratio of 30%

Targets

• Fund VI seeks to provide investors with an annualized net IRR of 12% to 15% and an annualized

distribution rate of 6+% once the Fund is fully invested

Torchlight Debt Opportunity Fund VI is Torchlight’s 9th institutional value-add / opportunistic fund

Targeted net annualized return of 12% to 15% is before tax that may be deducted on distributions payable to non-U.S. domiciled investors. There can be no assurance that the Fund will meet its

investment objectives or otherwise carry out its investment program successfully. No representation or guarantee is being made as to the future performance of the Fund.

11 11

Targeted net annualized return of 12.0% to 15.0% is before tax that may be deducted on distributions payable to non-U.S. domiciled investors. The Downside Case is not intended as a worst case scenario but rather is based on

projections, estimates and assumptions that are less favorable than our Base Case assumptions. Actual performance can be lower than the Downside scenario. There can be no assurance that the Fund will meet its investment

objectives or otherwise carry out its investment program successfully. Target returns and portfolio allocation are based upon various assumptions related to future spreads, default rates, interest rates, market trends and industry

trends. There can be no assurance that the targeted returns will ultimately be achieved. Total Net Returns reflect deductions for management fees and incentive fees. Please refer to Scenario Assumptions Disclaimers for important

information on default scenarios.

Torchlight believes that the current commercial real estate environment presents an attractive

investment opportunity to achieve net returns of 12% to 15%

Investment Strategy – Portfolio Allocation

Target Fund VI Total Net Return Scenarios

Base

Case

• The economic environment, credit markets and

real estate fundamentals remain unchanged 12% to 15%

Downside

Case

• The economic environment, credit markets and

real estate fundamentals deteriorate -2% to 0%

Upside

Case

• The economic environment and real estate

fundamentals improve with increased liquidity in

the credit markets

19% to 21%

Senior Mortgages -

Newly Originated /

Stapled Mezz 20%

Distressed Senior

Mortgages 10%

Mezzanine Loans / B-

Notes 25%

Preferred Equity / Equity 10%

Securitized Debt 35%

Initial Target Portfolio Allocation

12

Lease-up opportunity in a strong submarket at a favorable basis on new construction

Aurora Multifamily

Asset Highlights

o 417-unit, newly constructed multifamily property located in Aurora, IL

o Condo-quality finishes complete with keyless entry, 9’ ceilings, kitchens with 8’

islands, walk-in closets and balconies

o Best-in-class amenity package including fitness center with glass-enclosed

yoga/spin studio, resort-style rooftop pool and gardens, golf simulators and indoor

parking garages

Investment Summary

o Torchlight provided a bridge loan to take out the existing construction financing

o At the start of Torchlight’s due diligence, the property had recently received a

Certificate of Occupancy and was 6.0% occupied in a market that has averaged

94.9% occupancy over the past 17 years

o Net of lender fees and interest reserves totaling $5.2 million, Torchlight’s last-dollar

exposure of $74.8MM ($179K/unit) is below sales comparables averaging

$251K/unit

o Based on the as-is appraised value of $115.0MM ($276K/unit), the LTV on

Torchlight’s last dollar of exposure is 65.0%

Structure

o The $60.0MM senior loan ($144K/unit) has an initial two year term at a coupon of

one-month LIBOR + 3.85%

o The $20.0MM mezzanine loan ($192K/unit) has a coupon of 14.0%

o The sponsor has $19.1MM of equity invested, $10.8MM of which is new capital

o Lender fees to the fund of 0.5% at origination and 1.0% upon exit

Performance

○ As of January 2018, the property is 52.8% occupied compared to initial underwriting

projections of 41.5%. The property is achieving average rents of $1.79psf, which is

in line with underwriting

○ Projected annualized gross return of -0.5% to 0.5% under the Downside scenario

and 12.5% to 14.5% under the Base Case scenario

$60.0MM Senior Loan

$20.0MM Stapled Mezz Loan

93.8% Submarket Occupancy

417 Units

65.0% Appraised LTV

Investment

Highlights

Acquired April 4, 2017. This case study is included as an example of a recent Senior Mortgage and Stapled Mezzanine investment. Return projections as of April 2017 are calculated on a gross basis without taking into account the effect of fund-level management

and incentive fees, or other fund-level expenses. Base case return projections assume leverage on the senior loan from origination. Had such other expenses been included, the projected returns would be lower. There can be no assurance that the projected returns

will ultimately be achieved. The descriptions above represent a summary and not all material details. Torchlight has made certain assumptions about market conditions, including spreads, default rates, and interest rates. Actual returns may be materially lower than

those projected depending upon the extent and manner in which actual market and economic conditions vary from those assumptions.

Please refer to Scenario Assumptions Disclaimers for important information on default scenarios.