On September 1st, PPR hosted a live webinar to overview the launch of the Cornerstone Home Lending Fund, PPR’s newest vehicle built around a strategy that’s been part of PPR since 2007: buying mortgages at a discount secured by real home equity. The Q&A that followed raised some genuinely thoughtful questions.
We pulled out the six themes that came up most: tax treatment for retirement accounts, downside protection, how the return actually gets generated, liquidity, how Cornerstone fits alongside PPR’s other funds and how each loan gets underwritten. The answers below expand on what we covered live.
Cornerstone is not a new strategy for PPR. It is the strategy the firm was built on, scaled through our SEC-registered affiliate starting in 2016, and now opened to investors directly in its own dedicated vehicle. Several of the questions below get at exactly why that distinction, a dedicated fund instead of a blended one, changes how the investment actually works.
Frequently Asked Questions
Q: Is Cornerstone Fund IRA or 401(k) friendly, and will it generate UBTI?
A: Yes, the Fund accepts capital from self-directed IRAs and other tax-exempt accounts. Because the Fund uses financing to acquire loans, tax-exempt investors should expect the possibility of unrelated business taxable income (UBTI), specifically unrelated debt-financed income. Once UBTI reaches $1,000 in a year, a custodian is generally required to file Form 990-T and pay any resulting tax from the account’s own assets. This is standard for leveraged real estate debt funds, not unique to Cornerstone. Our Capital Foundation Fund, however, offers exposure to the NPL offering with a simple K-1 reporting interest income.
Q: How does the Cornerstone Fund hold up in a recession, or if home prices fall sharply?
A: The Fund’s protection comes from purchase discipline, acquiring loans on properties that are generally 50% of the value. During the 2008 financial crisis, loans secured well below property value, even those held by borrowers with weak credit, lost just 1.30%, per Freddie Mac’s Single-Family Loan-Level Dataset. That’s the same collateral profile Cornerstone targets: the homeowner’s equity absorbs losses before the Fund’s capital does.
Q: Mortgage rates are around 7% today. How does Cornerstone Fund target an 8% preferred return and a 12%+ net IRR?
A: The return isn’t generated by originating loans at market mortgage rates. Rather, it stems from the discount at which the Fund acquires already-defaulted loans, historically around 40 to 50% of the underlying property value. Value gets created by buying at that discount and working the loan back to performing status, selling it as re-performing paper, or securitizing it, not by simply collecting a coupon. Any fund-level or gross figures referenced elsewhere are calculated before fees; the Fund’s targeted return is net of fees. Targeted returns are not guaranteed.
Q: What are the Fund’s liquidity options if I need my capital back before the fund’s term ends?
A: The Fund has a defined term, but its structure is intended to build in redemption opportunities rather than one single exit event. As loan pools are refinanced into longer-term debt, the Fund intends to open a redemption window: investors who want out can redeem at par, capital plus the preferred return earned, while investors who stay retain the opportunity to share in profit above that.
Q: How is Cornerstone different from PPR’s other funds, like the Capital Foundation Fund?
A: PPR now offers investors a choice: a single, focused strategy, or a blend built for diversification. The Capital Foundation Fund blends non-performing loans and build-to-rent in one simplified vehicle. Cornerstone is the dedicated expression of just the non-performing loan strategy, for investors who want direct exposure to that specific strategy. For build-to-rent on its own, PPR also offers the Keystone Housing Growth Fund.
Q: How does PPR actually source and underwrite non-performing loans?
A: Every loan the Fund considers goes through the same process before a dollar is committed: significant diligence covering compliance, servicing and pay history, title, municipal liens, property condition, valuation and foreclosure or bankruptcy status. That discipline lets the Fund price risk consistently across large pools rather than loan by loan. It’s also how the platform approached a recent Fannie Mae non-performing loan sale, winning a pool of more than 1,300 defaulted loans at roughly half of the underlying property value.
The Cornerstone Home Lending Fund is now available to accredited investors. If any of these questions raised another one for you, our investor relations team is happy to walk through the fund in more detail. Schedule a call, learn more about the Cornerstone Home Lending Fund or Get Started Today.
