Scarlet Matador Fund - PPM

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A PRIVATE OFFERING

for

Scarlet Matador Fund, LLC

of

499 Preferred Units


THIS MEMORANDUM CONSTITUTES AN OFFER ONLY IF A NAME APPEARS IN THE

APPROPRIATE SPACE PROVIDED BELOW AND IS AN OFFER ONLY TO THE NAMED

OFFEREE. NO PORTION OF THIS MEMORANDUM MAY BE DUPLICATED FOR ANY

PURPOSE. THIS MEMORANDUM CONTAINS CONFIDENTIAL AND/OR TRADE SECRET

INFORMATION.

NO OFFEREE IS AUTHORIZED TO RELY UPON ANY INFORMATION WITH RESPECT TO THE

SECURITIES DESCRIBED IN THIS MEMORANDUM OTHER THAN INFORMATION

CONTAINED IN THIS MEMORANDUM.

CONFIDENTIAL

PRIVATE PLACEMENT MEMORANDUM

January 11, 2010

Name: _________________________________

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CONFIDENTIAL PRIVATE PLACEMENT MEMORANDUM

SCARLET MATADOR FUND, LLC

$9,980,000.00

Minimum Offering: $500,000

Maximum Offering: $9,980,000

Offer of 499 Preferred Membership Interests (Units) out of a Total of 1,000 equaling a 49.90% ownership stake

Minimum Offering Amount per Unit is: $20,000 per Unit

Minimum Subscription: $40,000 for Two Units

Total Units (herein “Units”) being offered is 499

Scarlet Matador Fund, LLC, Texas Limited Liability Company (the “Fund”), is offering for sale (the

“Offering”) up to 499 Preferred Units (a “Unit” and collectively, the “Units”), with a minimum subscription of

$40,000 for Two Units. Management of the Fund has a solid track record and historic success in the multifamily

industry.

The Fund is offering the Units on a “best efforts”, basis by its officers and directors. All proceeds from the

sale of Units up to the Minimum Offering ($500K) will be placed in an escrow account and will immediately be

made available for use by the Fund once the Minimum Offering has been subscribed for. While the Fund has not

done so as of the date of this Memorandum, it may engage broker/dealers who are members of FINRA to assist

with the Offering and pay commission of up to 5% (five percent). The Securities are being offered to “Accredited

Investors” only.

THE SECURITIES OFFERED HEREBY ARE SPECULATIVE, INVOLVE A HIGH DEGREE OF RISK, AND

SHOULD NOT BE PURCHASED BY INVESTORS WHO CANNOT AFFORD THE LOSS OF THEIR

ENTIRE INVESTMENT. SEE "RISK FACTORS."

PRICE TO THE

INVESTORS(1)

MAXIMUM

COMMISSIONS(2)

PROCEEDS TO THE

FUND

Minimum Investment $40,000 $2,000 $38,000

Minimum Offering $500,000 $25,000 $475,000

Maximum Investment $9,980,000 $499,000 $9,481,000

i. The minimum purchase requirement is 2 Units for $40,000.

ii. The Fund may pay commissions or fees to licensed broker-dealers and/or finders in an amount not to exceed 5%.

iii. Commissions will only be allocated once funding has cleared.

iv. The maximum investment in the Units cannot exceed $9.98 million. Therefore, no investor will be permitted to purchase

more than $9.98 million in Units.

THESE SECURITIES ARE BEING SOLD IN TRANSACTIONS NOT INVOLVING A PUBLIC OFFERING.

THE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE

COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, (THE "ACT") IN RELIANCE

UPON EXEMPTIONS UNDER SECTION 4(2), REGULATION D 506, AND 4(6), THE ACCREDITED

INVESTOR EXEMPTION. THESE SECURITIES ARE SPECULATIVE, NONLIQUID AND INVOLVE

SIGNIFICANT RISKS.

------------------------------------------------------------------------------------------------------------

The Date of this Private Placement Memorandum is January 1, 2010

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CONSIDERATIONS

THIS PRIVATE PLACEMENT MEMORANDUM AND THE EXHIBITS HERETO

(COLLECTIVELY, THE "MEMORANDUM") HAVE BEEN SUBMITTED ON A CONFIDENTIAL

BASIS FOR USE BY A LIMITED NUMBER OF SOPHISTICATED INVESTORS WHO ARE

ACCREDITED INVESTORS SOLELY FOR, AND SHOULD BE USED ONLY IN CONNECTION

WITH, A PROSPECTIVE INVESTOR’S CONSIDERATION OF AN INVESTMENT IN THE

SECURITIES OF SCARLET MATADOR FUND, LLC ("SCARLET MATADOR FUND, LLC" OR

THE "FUND") DESCRIBED HEREIN. ITS USE FOR ANY OTHER PURPOSE IS NOT

AUTHORIZED. THIS MEMORANDUM CONSTITUTES AN OFFER ONLY TO THE OFFEREE TO

WHOM THE MEMORANDUM HAS BEEN DISTRIBUTED. ANY REPRODUCTION OR

DISTRIBUTION OF THIS MEMORANDUM OR RETRANSMITTAL OF ITS CONTENTS, IN

WHOLE OR IN PART, WITHOUT THE PRIOR WRITTEN CONSENT OF THE FUND IS

PROHIBITED.

THIS MEMORANDUM CONTAINS CERTAIN INFORMATION OF A HIGHLY CONFIDENTIAL

NATURE. THE RECEIPT OF THIS MEMORANDUM CONSTITUTES AN AGREEMENT ON THE

PART OF THE RECIPIENT HEREOF TO MAINTAIN THE CONFIDENTIALITY OF THE

INFORMATION CONTAINED HEREIN OR ANY ADDITIONAL INFORMATION

SUBSEQUENTLY DELIVERED IN CONNECTION HEREWITH. PROSPECTIVE INVESTORS

WHO ACCEPT THIS MEMORANDUM OR BECOME AWARE OF THE INFORMATION

CONTAINED HEREIN MUST UNDERSTAND AND COMPLY WITH THE EXTENSIVE FEDERAL

AND STATE SECURITIES LAW RESTRICTIONS PLACED UPON THEIR ABILITY TO

DISCLOSE INFORMATION CONTAINED HEREIN TO OTHERS OR TO PARTICIPATE IN OR

OTHERWISE EFFECT OR FACILITATE ANY TRANSACTION RELATING TO ANY SECURITIES

OF THE FUND. PROSPECTIVE INVESTORS WHO CANNOT COMPLY FULLY WITH SUCH

RESTRICTIONS SHOULD NOT REVIEW THE INFORMATION CONTAINED HEREIN AND

SHOULD IMMEDIATELY RETURN THIS MEMORANDUM TO THE FUND.

THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED WITH OR APPROVED

BY THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION ("SEC") OR ANY

SECURITIES REGULATORY AUTHORITY OF ANY STATE OR OTHER JURISDICTION, NOR

HAS THE SEC OR ANY SUCH AUTHORITY PASSED UPON OR ENDORSED THE MERITS OF

THIS OFFERING OR THE ACCURACY OR ADEQUACY OF THIS MEMORANDUM. ANY

REPRESENTATION TO THE CONTRARY IS UNLAWFUL. THE SECURITIES OFFERED

HEREBY MAY NOT BE DIRECTLY OR INDIRECTLY OFFERED, SOLD OR DELIVERED TO

ANY PERSON IN ANY JURISDICTION EXCEPT IN COMPLIANCE WITH APPLICABLE LAW.

SCARLET MATADOR FUND, LLC IS A TEXAS LIMITED LIABILITY COMPANY.

THIS MEMORANDUM DOES NOT CONSTITUTE AN OFFER OR SOLICITATION TO ANY

PERSON IN ANY STATE OR OTHER JURISDICTION IF SUCH OFFER OR SOLICITATION IS

NOT LAWFUL. AS A PURCHASER OF THE SECURITIES IN A PRIVATE PLACEMENT NOT

REGISTERED UNDER THE SECURITIES ACT, OR OTHER APPLICABLE LAW, EACH

INVESTOR SHOULD PROCEED ON THE ASSUMPTION THAT IT MUST BEAR THE

ECONOMIC RISK OF THE INVESTMENT FOR AN INDEFINITE PERIOD, SINCE THE

SECURITIES OFFERED HEREBY MAY NOT BE RESOLD UNLESS THEY ARE

SUBSEQUENTLY REGISTERED UNDER THE SECURITIES ACT, OR OTHER APPLICABLE

LAW, OR AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE. ALL INVESTORS

MUST UNDERSTAND AND AGREE THAT THEY WILL NOT RESELL THE SECURITIES

EXCEPT IN A TRANSACTION WHICH DOES NOT REQUIRE REGISTRATION UNDER THE

SECURITIES ACT, OR OTHER APPLICABLE LAW, AS CONFIRMED BY A LEGAL OPINION

ACCEPTABLE TO THE FUND, IF SUCH LEGAL OPINION IS REQUIRED BY THE FUND. THE

SECURITIES OFFERED HEREBY WILL BEAR A LEGEND DESCRIBING THE FOREGOING

RESTRICTIONS.

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NO PERSON HAS BEEN AUTHORIZED TO MAKE ANY REPRESENTATIONS OR GIVE ANY

INFORMATION WITH RESPECT TO THE FUND OR THE OFFERED SECURITIES, EXCEPT THE

INFORMATION CONTAINED HEREIN. PROSPECTIVE INVESTORS SHOULD NOT RELY ON

ANY INFORMATION NOT CONTAINED IN THIS MEMORANDUM. REPRESENTATIVES OF

THE FUND WILL BE AVAILABLE TO DISCUSS WITH PROSPECTIVE INVESTORS, ON

REQUEST, THE INFORMATION AND PROJECTIONS CONTAINED HEREIN.

PROSPECTIVE INVESTORS ARE NOT TO CONSTRUE THE CONTENTS OF THIS

MEMORANDUM OR ANY WRITTEN OR ORAL COMMUNICATION FROM THE FUND OR ITS

EMPLOYEES AS LEGAL, BUSINESS OR TAX ADVICE. EACH PROSPECTIVE INVESTOR

SHOULD CONSULT ITS OWN ATTORNEY, BUSINESS ADVISOR AND TAX ADVISOR AS TO

LEGAL, BUSINESS, TAX AND RELATED.

MATTERS CONCERNING THIS OFFERING

THE FUND IS MAKING NO REPRESENTATION TO AN OFFEREE OR PURCHASER OF THE

SECURITIES OFFERED HEREBY REGARDING THE LEGALITY OF AN INVESTMENT

THEREIN BY SUCH OFFEREE OR PURCHASER UNDER APPROPRIATE LEGAL INVESTMENT

OR SIMILAR LAWS.

NEITHER THE DELIVERY OF THIS MEMORANDUM AT ANY TIME NOR ANY SALE MADE

PURSUANT TO THIS MEMORANDUM SHALL IMPLY THAT THE INFORMATION

CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE SET

FORTH HEREIN. EACH PROSPECTIVE INVESTOR, BY ACCEPTING DELIVERY OF THIS

MEMORANDUM, AGREES TO RETURN IT TO THE FUND IF THE PROSPECTIVE INVESTOR

DOES NOT PURCHASE THE SECURITIES DESCRIBED HEREIN OR IF THE OFFERING IS

TERMINATED.

THIS INVESTMENT IS SPECULATIVE AND SUITABLE ONLY FOR PERSONS WHO HAVE

SUBSTANTIAL FINANCIAL RESOURCES AND MEET CERTAIN SUITABILITY

REQUIREMENTS, WHO DO NOT ANTICIPATE THAT THEY WILL BE REQUIRED TO

LIQUIDATE ANY INVESTMENT ACQUIRED HEREUNDER IN THE FORESEEABLE FUTURE,

AND WHO UNDERSTAND OR HAVE BEEN ADVISED WITH RESPECT TO ANY RISK

FACTORS ASSOCIATED WITH THIS OFFERING. SEE "RISK FACTORS” AND "SUITABILITY

STANDARDS". THERE MAY BE MATERIAL INVESTMENT RISKS ASSOCIATED WITH THIS

OFFERING WHICH CANNOT BE IDENTIFIED AT THIS TIME.

NO TRADING MARKET IN THE UNITED STATES IS EXPECTED TO DEVELOP FOR THE

UNITS. SUBSTANTIAL RESTRICTIONS WILL BE IMPOSED ON ANY SALE OR TRANSFER OF

ANY OF THE SECURITIES OFFERED HEREBY. SEE "RISK FACTORS".

THIS MEMORANDUM IS TO BE EMPLOYED SOLELY IN CONNECTION WITH THE OFFERING

OF THE SECURITIES DESCRIBED HEREIN. DELIVERY OF THIS MEMORANDUM TO ANY

PERSON OTHER THAN THE RECIPIENT NAMED ON THE COVER OR IN ANY OTHER

MANNER IS NOT TO BE CONSTRUED AS AN OFFER. PURCHASE OF THE SECURITIES MAY

ONLY BE MADE BY PERSONS TO WHOM OFFERS ARE MADE AND ONLY IN ACCORDANCE

WITH THE PROCEDURES DESCRIBED IN THIS MEMORANDUM. ALL PURCHASES ARE

SUBJECT TO ACCEPTANCE BY THE FUND.

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NASAA UNIFORM LEGEND

IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON THEIR OWN

EXAMINATION OF THE PERSON OR ENTITY CREATING THE SECURITIES AND THE

TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED.

THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE

SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE

FORGOING AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE

ADEQUACY OF THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A

CRIMINAL OFFENSE.

THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE

AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT,

AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION

OR EXEMPTION THEREFROM. INVESTORS SHOULD BE MADE AWARE THAT THEY WILL

BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE

PERIOD OF TIME.

JURISDICTIONAL NOTES

Prospective investors are not to construe the contents of this document or any prior or subsequent

communications from the offerer as legal or tax advice. Each investor must rely on his own representative

as to legal, income tax and related matters concerning this investment.

PROJECTIONS MAY BE CONTAINED IN THIS MEMORANDUM AND ANY OTHER

PROJECTIONS WHICH DO NOT CONFORM TO THOSE IN THIS OFFERING DOCUMENT

SHOULD BE DISREGARDED.

EVERY INVESTOR SHOULD BE AWARE THAT THE FUND HAS NO OBLIGATION, NOR DOES

IT INTEND, TO REPURCHASE THE UNITS FROM INVESTORS IN THE EVENT THAT, FOR ANY

REASON, AN INVESTOR WISHES TO TERMINATE THE INVESTMENT.

This document is Confidential and contains proprietary information. It is intended for the exclusive use

of the party of receipt. This document may not be reproduced either in part or in whole.

NOTICE TO TEXAS RESIDENTS ONLY:

THE SECURITIES OFFERED HEREUNDER HAVE NOT BEEN REGISTERED UNDER

APPLICABLE TEXAS SECURITIES LAWS AND, THEREFORE, ANY PURCHASER THEREOF

MUST BEAR THE ECONOMIC RISK OF THE INVESTMENT FOR AN INDEFINITE PERIOD OF

TIME BECAUSE THE SECURITIES CANNOT BE RESOLD UNLESS THEY ARE

SUBSEQUENTLY REGISTERED UNDER SUCH SECURITIES LAWS OR AN EXEMPTION FROM

SUCH REGISTRATION IS AVAILABLE. FURTHER, PURSUANT TO §109.13 UNDER THE

TEXAS SECURITIES ACT, THE COMPANY IS REQUIRED TO APPRISE PROSPECTIVE

INVESTORS OF THE FOLLOWING: A LEGEND SHALL BE PLACED, UPON ISSUANCE, ON

CERTIFICATES REPRESENTING SECURITIES PURCHASED HEREUNDER, AND ANY

PURCHASER HEREUNDER SHALL BE REQUIRED TO SIGN A WRITTEN AGREEMENT THAT

HE WILL NOT SELL THE SUBJECT SECURITIES WITHOUT REGISTRATION UNDER

APPLICABLE SECURITIES LAWS, OR EXEMPTIONS THEREFROM.

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FORWARD LOOKING STATEMENTS

This Memorandum contains words such as “believe,” “plan,” “expect,” “intend,” “estimate,” and

“anticipate” and similar expressions that constitute “forward-looking statements.” Forward-looking

statements include statements relating to the expected results of Scarlet Matador Fund, LLC’s (the

“Fund”) activities and related capital expenditures, the expected results of the Fund’s strategy, the

development of the Fund’s business and its model, the anticipated use of proceeds, projected

expenditures and profits and the Fund’s ability to borrow funds. Such statements are based on the Fund’s

current views and assumptions and involve known and unknown risks and uncertainties that could cause

actual results, performance or events to differ materially from those expressed or implied in such

statements.

Although Management believes that the expectations of the Fund’s as reflected by such forward-looking

statements are reasonably based on information currently available, no assurances can be given that such

expectations will prove to have been correct. Prospective investors should not rely on any of these

forward-looking statements as statements of historical fact or guarantees or assurances of future

performance. Actual results, performance or events may differ materially from those expressed or

implied in such statements.

These risks and others described under “Risk Factors” are not exhaustive. Any forward-looking

statements made by the Fund in this Memorandum speak only as of the date hereof. Factors or events

that could cause the Fund’s actual results to differ may emerge from time-to-time, and it is not possible

for the Fund to predict all of them. Scarlet Matador Fund, LLC undertakes no obligation to update any

forward-looking statement made in this Memorandum, whether as a result of new information, future

developments or otherwise.

For more information, contact the Fund:


Mr. Brent D Preston

7111 Santa Fe Dr

Lubbock, TX 79407

Tele: 806-470-0464

[email protected]

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TABLE OF CONTENTS

Executive Summary…………………………………………………………………………….. 8

Summary of the Offering……………………………………………………………………….. 9

Suitability Standards……………………………………………………………………………. 13

Risk Factors………………………………………………………………………………….….. 15

Cap Structure……………………………………………………………………………………. 18

Management………………………………………………………………………………….…. 19

Tax Considerations…………………………………………………………………………….….. 24

Additional Information……………………………………………………………………….… 25

Exhibits

A. Business Plan……………………………………………………………………………….. 25

B. Investor Questionnaire……………………………………………………………………….. 56

C. Subscription Agreement…………………………………………………………………….. 63

--Subscription Instructions

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Fund Overview

Introduction

The current national economic woes have created a tremendous opportunity, specifically within the

multifamily real estate and multifamily capital marketplace. Market conditions along with the current

administration has created a significant yield spread/pricing gap between stabilized, well operated

properties and distressed multifamily assets. Agency lenders such as Fannie Mae and Freddie Mac are

producing over 80% of multifamily loan volume. The remaining 20% of volume is distributed between

HUD, regional and national portfolio loans, hard money and bridge lenders, and local interim bank

financing. This capital distribution model offers a very competitive array of options for the acquisition of

stabilized multifamily assets, but offers very little options for the acquisition of distressed multifamily

assets. The multifamily property market has adjusted to this capital marketplace and prices for quality

distressed asset buyers have significantly dropped to generational lows, while stabilized multifamily

asset prices have dropped much less.

Scarlet Matador Fund’s management team has over 10 years experience is the successful identification,

acquisition, renovation, stabilization, management, marketing, and disposition of distressed multifamily

assets. The management team’s deal-flow has outgrown their capital resources and has elected to create

the Scarlet Matador Fund, LLC to exploit the current inefficiency that they have identified within the

market.

Property Management Inc (PMI) is a wholly owned company of fund management; they provide 3rd

party services to the multifamily industry such as: property management, construction management,

bookkeeping/accounting, and brokerage services. PMI has been engaged to provide all of these services

to all assets owned by Scarlet Matador Fund, LLC. This will not only streamline the Fund’s operations

but will eliminate any “overhead” or administrative expenses for the Fund.

Need

These uncanny market conditions have created a solid opportunity for sophisticated investor/buyers that

have a real understanding of the complex dynamics of today’s multifamily marketplace. Distressed

assets buyers in this marketplace are filling a direct need of the marketplace, creating a previously

unseen opportunity for the creation of tremendous stakeholder wealth. Many unconventional sellers such

as special servicers, receivers, lenders, banks, federal agencies, and so on are in dire need of experienced

operators to acquire these distressed assets at significantly below market prices, in order to clean up

balance sheets of lending institutions. They are increasing only seeking to deal with experienced

distressed asset buyers that can move quickly and can be depended on to close. These relationships are

one of the key factors in the Scarlet Matador Fund’s management’s previous success.

Solution

The basic business model for the Scarlet Matador Fund, LLC is one that has been created and adopted by

the management team of the Fund. There are always minor inefficiencies within the multifamily capital

and real estate markets, but today’s other economic conditions have drastically magnified these

inefficiencies. Fund management has been involved in this specific industry for over ten years and has

completed multiple successful rounds of acquisitions and dispositions.

Fund management has recognized the rare opportunity in today’s marketplace and has exploited the

opportunity to their fullest ability. They currently have four large projects going. Their deal-flow and

management capabilities are far greater than their own capital resources. As a result they have formed

the Scarlet Matador Fund, LLC to not only seize the current opportunities of today’s marketplace, but

also to create investor wealth.

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________________________________________________________________________________

THE OFFERING TERM SHEET

__________________________________________________________________________________

This summary of certain provisions of this Memorandum is intended only for convenient reference.

It is not intended to be complete and is qualified in its entirety by the more detailed information contained

elsewhere in this Memorandum and in the Exhibits hereto. The full text of this Memorandum, and the

Exhibits to it, should be read in detail and understood by each potential Investor. The term “Investor”

shall mean qualified entities receiving this Memorandum.

The Fund: Scarlet Matador Fund, LLC, formed on December 17, 2009, is a

Texas Limited Liability Company. Its principal office is located at:

7111 Santa Fe Dr, Lubbock, TX 79407; Tele: 806-470-0464.

Description of the Fund: Scarlet Matador Fund, LLC will purchase distressed or

undervalued real estate, will manage such real estate and resell

properties for a profit. Management of the Fund has a solid track

record and historic success in the multifamily industry.

The Manager: Mr. Brent D Preston is the Founder and Managing Member of

Scarlet Matador Fund, LLC.

Securities Offered: The Fund is offering for sale up to 499 Preferred Units (“Unit”) for

$9,980,000, payable in cash upon subscription. The Fund reserves

the right in its sole discretion to increase the size of the Offering.

Pricing: $20,000 per Unit.

Minimum Investment: $40,000 for 2 (two) Units.

Units Authorized: Currently 1,000 Preferred Membership Interests (“Units”). All

Units are to be issued and outstanding following the completion of

the Offering.

Use of Proceeds: For general corporate and working capital purposes. See “Use of

Proceeds”.

Description of Units 499 Preferred Units are being offered. Preferred Unit Holders will

receive a + 6.5% annual return on “vested” funds, to be paid

monthly, quarterly, or annually (to be determined once operations

are underway in the Managing Member’s full discretion).

“Vested” mean when funds are actually allocated to acquire a

specific property.1

1 Example: The LLC received $500,000 in subscriptions in 30 days. An additional 30 days pass prior to the closing of the Fund

for this first acquisition. Investors would not receive a preferred return until after closing on this first property. Example #2: the

first property requires $400K in capital, the 6.5% preferred return will be computed on a pro-rata share of total $500K invested.

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Voting Rights: 1 vote per Unit; no active participation in the daily affairs of the

Fund.

Restrictions on Resale: The investor(s) who purchase any Units pursuant to this Offering

will be restricted from selling, transferring, pledging or otherwise

disposing of any Units due to restrictions under applicable U.S.

Federal and State securities laws.

How to Invest: Each investor must:

(a) Execute and deliver the Subscription Agreement

attached hereto as Exhibit C.

(b) Wire or mail the total subscription funds to the Fund’s

bank account per the instructions in Appendix C.

Who May Invest: The Units of the Fund are being offered pursuant to this

Memorandum solely to persons who are sophisticated and

“accredited investors”, as defined in Regulation D promulgated

under the Act. See the Accredited Investor Suitability

Questionnaire attached hereto as Exhibit B.

Investor Suitability: This Offering will be made pursuant to exemptions from

registration provided by Section 4(2) of the Act, Regulation D

promulgated thereunder, and exemptions available under

applicable state securities laws and regulations. Persons desiring

to invest in the Fund will be required to make certain

representations and warranties regarding their financial condition

in the Subscription Agreement attached hereto as Exhibit C. Such

representations include, but are not limited to, certification that the

investor is an accredited investor. The Fund reserves the right to

reject any Subscription in whole or in part in its sole discretion.

See “Suitability Standards.”

THE SUBSCRIPTION AGREEMENT INCLUDES CERTAIN

REPRESENTATIONS AND WARRANTIES OF THE

INVESTOR ON WHICH THE FUND WILL RELY IN

DETERMINING WHETHER TO ACCEPT THE

SUBSCRIPTION. PROSPECTIVE INVESTORS ARE URGED

TO READ THE SUBSCRIPTION AGREEMENT CAREFULLY

AND, TO THE EXTENT THEY DEEM APPROPRIATE, TO

DISCUSS THE SUBSCRIPTION AGREEMENT, THIS

MEMORANDUM AND THEIR PROPOSED INVESTMENT IN

THE SECURITIES WITH THEIR LEGAL OR OTHER

ADVISORS.

Plan of Distribution: The Units are being offered on a “best-efforts” basis by the Fund.

The Fund reserves the right to allow broker/dealers which are

registered as such with the SEC and which are members of FINRA

(“Placement Agents”) to sell the Units. The Fund may pay up to a

5% commission on the gross proceeds, plus expenses, of any Units

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sold by such registered brokers. The Fund may conduct multiple

closings (“Interim Closings”) up to the specified Offering amount,

at which time a final closing will be held (the “Final Closing”).

The Offering will be open until the Offering is reached, but no

later than June 30, 2010, unless earlier terminated by the Fund, or

extended for up to 180 days, at the Managing Member’s sole

discretion.

Subscriptions: Investors who wish to subscribe for the Units may do so by

executing the Subscription Agreement attached hereto as Exhibit C

and delivering the completed materials and payment for the Units

to the Fund. A subscription may not be considered for acceptance

unless it is completely filled out and properly executed and is

accompanied by payment in full for the Units which are being

purchased. Subscriptions accompanied by payment in the form of a

personal check, if accepted, will be so accepted conditioned upon

and subject to clearance of the check and the Units will not be

delivered until the check clears. Funds accompanying any

subscription not accepted by the Fund will be promptly returned to

the Investor without interest thereon or deduction therefrom.

Availability of Funds: All proceeds from the sale of Units up to $500,000 (the “Minimum

Offering”) will be placed in an escrow interest bearing account

until the Minimum Offering is subscribed for ($500K). Therefore,

upon procuring $500,000, the Fund reserves the right to utilize the

funds for Fund expenditures. If, after twelve months, no more than

$499,999 has been procured, the Fund will refund all investment to

the Subscriber with interest earned.

Resales or Transfer of Units: The Units in the Fund are being offered under the exemption from

registration under the Securities Act of 1933, as amended (the

“Act”), pursuant to Rule 506 of Regulation D of the Rules and

Regulations of the Securities and Exchange Commission. Thus,

the securities which are the subject of this Offering will be

“restricted securities” as that term is defined in Rule 144 of the

General Rules and Regulation of the Securities and Exchange

Commission. Furthermore, each purchaser must execute a

Subscription Agreement acknowledging, among other things, the

restrictions on transfer described above and elsewhere herein.

There is no public market for the Units.

By executing the Subscription Documents, each subscriber must

represent, among other things, that such subscriber is acquiring the

Units for the subscriber’s own account for investment and not with

a view toward, or for resale in connection with, a distribution of

the Units. Each subscriber is advised to consult such subscriber’s

personal legal advisor for more detailed information concerning

the restrictions on transfer of securities sold in a transaction such

as this Offering. See the SUBSCRIPTION DOCUMENTS

attached to this Memorandum as Exhibit C.

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Risk Factors: The Units offered hereby involve a high degree of risk. See “Risk

Factors” set forth in the Memorandum and the SEC Documents.

[THIS SPACE INTENTIONALLY LEFT BLANK]

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SUITABILITY STANDARDS

INVESTMENT IN THE PREFERRED UNITS (“UNITS”) OF SCARLET MATADOR FUND, LLC

INVOLVES A HIGH DEGREE OF RISK AND IS SUITABLE ONLY FOR THOSE INVESTORS WHO

HAVE SUBSTANTIAL FINANCIAL RESOURCES IN RELATION TO THEIR INVESTMENT AND

WHO UNDERSTAND THE PARTICULAR RISK FACTORS OF THIS INVESTMENT. IN

ADDITION, INVESTMENT IN THE UNITS IS SUITABLE ONLY FOR AN INVESTOR WHO DOES

NOT NEED LIQUIDITY IN HIS INVESTMENT AND IS WILLING TOACCEPT RESTRICTIONS ON

THE TRANSFER OF THE UNITS.

Investor Suitability

Subject to the right of the Fund to sell Units to sophisticated and Accredited Investors ("Qualified

Investors"), Units will be sold only to those investors who submit an Offeree Questionnaire in the form

attached hereto as Exhibit "B" establishing to the satisfaction of the Fund that:

1. The investor is a "Qualified Purchaser," as defined as follows:

(i) a natural person who, either individually or jointly with his/or her spouse, has a minimum

net worth of $500,000, or a minimum net worth of $250,000, and, during the last taxable year

had, and during the current year expects to have, a minimum gross income of $100,000 (net

worth shall be determined exclusive of home, home furnishings and automobiles);

(ii) a self-employed individual retirement plan or an individual retirement account (IRA), if the

investment decisions are made solely by persons who are qualified purchasers.

(iii) any organization described in section 501(c)(3)of the Internal Revenue Code, a corporation,

Massachusetts or similar business trust, or a partnership, not formed for a specific purpose of

acquiring the securities offered, with total assets in excess of $5,000,000; or

(iv) any entity in which all the equity owners are Qualified Purchasers.

2. The investor has such knowledge and experience in financial and business matters that he is able

to evaluate the merits and risks of an investment in the Units.

3. The investor has the financial ability to bear the economic risk of an investment in the Units,

adequate means of providing for his current needs and personal contingencies and no need for liquidity in

an investment in the Units.

4. The investor is acquiring the Units for his own account for investment and not with a view to resale

or distribution.

5. The investor is an “Accredited Investor” as defined in Regulation D, that is:

a) Any bank as defined in Section 3(a)(2) of the Securities Act, or any savings and loan

association or other institution as defined in Section 3(a)(5)(A) of the Securities Act, whether

acting in its individual or fiduciary capacity; any broker or dealer registered pursuant to Section

15 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”); an insurance

company as defined in Section 2(13) of the Securities Act; any investment company registered

under the Investment Company Act of 1940 or a business development company as defined in

Section 2(a)(48) of that act; a Small Business Investment Company licensed by the U.S. Small

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Business Administration under Section 301(c) or (d) of the Small Business Investment Act of

1958; any plan established and maintained by a state, its political subdivisions, or any agency or

instrumentality of a state or its political subdivisions, for the benefit of its employees, if such

plan has total assets Section 301(c) or (d) of the Small Business Investment Act of 1958; any

plan established in excess of $5,000,000; any employee benefit plan within the meaning of the

Employee Retirement Income Security Act of 1974, if the investment decision is made by a plan

fiduciary, as defined in Section 3(21) of such act, which is either a bank, savings and loan;

b) An association, insurance company or registered investment adviser, or if the employee

benefit plan has total assets in excess of $5,000,000 or, if a self-directed plan, with investment

decisions made solely by persons that are accredited investors; Any private business

development company as defined in Section202(a)(22) of the Investment Advisers Act of 1940;

c) Any organization described in Section 501(c)(3) of the Internal Revenue Code, corporation

or similar business trust, or partnership, not formed for the specific purpose of acquiring the

securities offered, with total assets in excess of $5,000,000;

d) Any director, executive officer or manager of the Company;

e) Any natural person whose individual net worth, or joint net worth with that person’s

spouse, at the time of purchase exceeds $1,000,000;

f) Any natural person who had an individual income in excess of $200,000 in each of the two

most recent years or joint income with that person’s spouse in excess of $300,000 in each of

those years and has a reasonable expectation of reaching the same income level in the current

year;

g) Any trust with total assets in excess of $5,000,000, not formed for the specific purpose of

acquiring the securities offered hereby, whose purchase is directed by a sophisticated person as

described in Rule 506(b)(2)(ii) of Regulation D; or

h) Any entity in which all the equity owners are “Accredited Investors” as defined above.

A prospective investor in Scarlet Matador Fund, LLC will be required to represent that: (a) he or she

knows that neither the Units have not been registered under the Securities Act, and he or she has no right

to require such registration; (b) he or she understands that his or her Units will be restricted as set forth in

the Memorandum, which includes restrictions against transfer unless the transfer is not in violation of the

Securities Act, and applicable state securities laws (including investment suitability standards); (c)

payment for the Units will cause no undue hardship without undue difficulty; and (d) the subscriber’s

commitment to other investment programs, combined with the subscription for Units, is reasonable in

relationship to net worth.

Please study the terms of the Subscription Agreement, this Memorandum and all related documents

carefully before you decide to subscribe for Units.

The Fund will review all subscription documents and will not accept subscriptions from any person who

does not represent that he complies with the applicable standards specified above.

15 | P a g e

RISK FACTORS

THE SECURITIES (“UNITS”) BEING OFFERED INVOLVE A HIGH DEGREE OF RISK AND,

THEREFORE, SHOULD BE CONSIDERED EXTREMELY SPECULATIVE. THEY SHOULD NOT

BE PURCHASED BY PERSONS WHO CANNOT AFFORD THE POSSIBILITY OF THE LOSS OF

THE ENTIRE INVESTMENT. PROSPECTIVE INVESTORS SHOULD READ THE ENTIRE

PRIVATE PLACEMENT MEMORANDUM AND CAREFULLY CONSIDER, AMONG OTHER

FACTORS THE FOLLOWING RISK FACTORS.

Management of Scarlet Matador Fund, LLC intends for the Fund to become a profitable entity via the real

estate market. The risks and uncertainties described below are not the only ones faced. Additional risks

and uncertainties not known to the Fund or ones known now, but believed to be less significant could also

impair the business. If any of the following risks actually occur, the business, financial condition or

operating results could be negatively affected. Among other things, consider the following. Fund Considerations

Risks Associated with Expansion: Any expansion of operations the Fund may undertake will entail risks,

such actions may involve specific operational activities which may negatively impact the profitability of

the Fund. Consequently, Unit Holders must assume the risk that (i) such expansion may ultimately involve

expenditures of funds beyond the resources available to the Fund at that time, and (ii) management of such

expanded operations may divert Management’s attention and resources away from its existing operations,

all of which factors may have a material adverse effect on the Fund’s present and prospective business

activities.

Unanticipated Obstacles to Execution of the Business Plan: The Fund’s business plans may change

significantly. Many of the Fund’s potential business endeavors are capital intensive and may be subject to

statutory or regulatory requirements. Management believes that the Fund’s chosen activities and strategies

are achievable in light of current conditions with the skills, background, and knowledge of the Fund’s

founders and advisors. Management reserves the right to make significant modifications to the Fund’s

stated strategies depending on future events.

Future Capital Needs; Uncertainty of Additional Funding: Management of Scarlet Matador Fund, LLC

currently anticipates that the net proceeds of the Offering will be sufficient to meet its development, design

evolution and other working capital requirements through the first stages of its business development plan.

Future capital may be required to complete development where logistical hurdles will need to be

overcome. The Fund may need to raise additional funds to sustain its purchase or development activities,

particularly if there is a major shift in marketplace. Adequate funds may not be available on terms

favorable to the Fund, if at all, to deal with such issues.

Real Estate Investments: Real estate purchase and investments (the Fund anticipates purchasing land and

renovating) are subject to numerous risks, including risks due to changes in general economic conditions,

local market conditions, demand factors, supply of competing properties in a market area, operating costs,

interest rates, or tax, real estate, environmental or zoning laws and regulations.

Labor and Power Supply: Interrupted labor or power supply may cause suspension/closure of production

and damage to machinery and housing materials, which could adversely affect the Fund, particularly in

terms of property renovation time schedules.

Change in Economy: Changes in the U.S. economy from time to time may have an adverse or favorable

impact on the profitability of the Fund. A protracted recession may also negatively impact the Fund’s

profitability.

16 | P a g e

Anticipated Revenue: Although management of the Fund has a solid track record and historic success in

the multifamily industry, the Fund’s results of operations may fluctuate in the future due to a combination

of factors, including the overall schedules of our renovations and/or developments, the level of acceptance

of by prospective buyer-renters, and any volatility in expenses such as construction costs and marketing

costs.

Potential liability for environmental problems could result in substantial costs: Scarlet Matador Fund,

LLC is subject to a variety of laws and regulations concerning the protection of health and the

environment. The particular environmental laws and regulations which apply to any given project

development site vary greatly according to the site’s location, the site’s environmental condition, the

present and former uses of the site, as well as adjoining properties. Compliance with environmental laws

and conditions may result in delays, may cause us to incur substantial compliance and other costs and can

prohibit or severely restrict project development activity in environmentally-sensitive regions or areas.

Our business may be adversely affected by increases in interest rates or banks refusing to lend

money: An increase in interest rates by the Federal Reserve, or banks withholding loans, could adversely

affect the affordability and attractiveness of financing for the project or from prospective buyers or renters

of our properties. Our cost of borrowing would also increase as a result of interest rate increases, which

could, in turn, adversely affect our results of operations.

We may face intense competition from other developers: Competition among real estate developers

may result in increased costs for the acquisition of land, increased costs for raw materials, shortages of

skilled contractors, oversupply of properties, decrease in prices, and increases in administrative costs for

hiring or retaining qualified personnel, any of which may adversely affect our business and financial

position. If we cannot respond to changes in market conditions as swiftly and effectively as our

competitors, our business and financial position will be adversely affected. If a well financed competitor

operates near our proposed location it could materially affect our business.

Dependence on Suppliers May Affect the Ability of the Fund to Conduct Business: The Fund depends

upon a number of suppliers for development, construction and renovations components. There is an

inherent risk that certain components of the Fund’s products will be unavailable for prompt delivery or, in

some cases, discontinued. The Fund has only limited control over any third-party suppliers as to quality

controls, timeliness of production, deliveries and various other factors. Should the availability of certain

components be compromised, it could force the Fund to develop alternative components, or employ

additional third-party suppliers, which could add to development costs, and compromise delivery

commitments, thus could materially adversely affecting business, results from operations and financial

condition.

Investment Considerations

Regulations: The Fund is subject to various federal and state laws, rules and regulations governing,

among other things, the licensing of, and procedures that must be followed by, and disclosures that must

be made to investors purchasing securities. Failure to comply with these laws may result in civil and

criminal liability and may, in some cases, give investors right to rescind their investment transactions

and to demand the return of funds paid to the Fund. Because the Fund’s business is highly regulated, the

laws, rules and regulations applicable to the Fund are subject to subsequent modification and change. The

Fund believes it is in full compliance with any and all applicable laws, rules and regulations.

Lack of Audited Financial Statements: The Fund does not have audited financial statements. In the

future, the books and records of the Fund will be audited by a firm of independent certified public

17 | P a g e

accountants selected by Management.

Management Discretion as to Use of Proceeds: The net proceeds from this Offering will be used for the

purposes described under “Use of Proceeds.” The Fund reserves the right to use the funds obtained from

this Offering for other similar purposes not presently contemplated which it deems to be in the best

interests of the Fund and its Unit Holders in order to address changed circumstances or opportunities. As a

result of the foregoing, the success of the Fund will be substantially dependent upon the discretion and

judgment of Management with respect to application and allocation of the net proceeds of this Offering.

Investors for the Units offered hereby will be entrusting their funds to the Fund’s Management, upon

whose judgment and discretion the investors must depend.

Long Term Nature of Investment: An investment in the Units may be long term and illiquid. As

discussed above, the offer and sale of the Units will not be registered under the Securities Act or any

foreign or state securities laws by reason of exemptions from such registration which depends in part on

the investment intent of the investors. Prospective investors will be required to represent in writing that

they are purchasing the Units for their own account for long-term investment and not with a view towards

resale or distribution. Accordingly, purchasers of Units must be willing and able to bear the economic risk

of their investment for an indefinite period of time. It is likely that investors will not be able to liquidate

their investment in the event of an emergency.

No Current Market for Units: There is no current market for the Units offered in this private Offering

and no market is expected to develop in the near future.

Dilution: If the Fund decides to authorize and sell additional securities current Unit Holders would most

likely face a dilution in ownership.

Offering Price: The price of the Units offered has been arbitrarily established by Scarlet Matador Fund,

LLC, considering such matters as the state of the Fund’s business development and the general condition

of the industry in which it operates. The Offering price bears little relationship to the assets, net worth, or

any other objective criteria of value applicable to Scarlet Matador Fund, LLC

Projections; Forward Looking Information: Management has prepared projections regarding Scarlet

Matador Fund, LLC’s anticipated financial performance. The Fund’s projections are hypothetical.


18 | P a g e

DISCLOSURE STATEMENTS

Competition

There can be no assurance that Scarlet Matador Fund, LLC’s business will not be adversely affected by

competition or that the Fund will be able to maintain its profitability if the competitive environment

changes. The Fund’s model is subject to changes, which could place the Fund at a competitive

disadvantage relative to alternative products/services introduced by competitors. The Fund’s success will

depend on its ability to continue to meet changing specifications with respect to quality, service and

performance by implementing and sustaining competitive products and services.

Scarlet Matador Fund, LLC’s business may therefore require, from time to time, significant additional

capital and investment. There can be no assurance that Scarlet Matador Fund, LLC will be able to achieve

advances or introduce new or improved products and services that may be necessary to remain

competitive. The inability of the Fund to continuously improve its business model could have a material

adverse impact on the financial condition and results of operations of Scarlet Matador Fund, LLC.

Date of Incorporation

Scarlet Matador Fund, LLC was originally formed on December 17, 2009 as a Texas Limited Liability

Company.

EQUITY STRUCTURE

Our existing authorized capital stock consists of 1,000 Preferred Membership Interests (“Units”). All

Units will be issued and outstanding following this offering. The current and, following this Offering,

future equity owners of Scarlet Matador Fund, LLC will consist of the following Unit Holders:

Current Number

of Common

Units

Current

Percentage of

Ownership

Number of Units

After Maximum

Offering

Percentage of

Ownership

After Maximum

Offering

Management Team 1000 100% 501 50.1%

Investors - - 499 49.9%

- - - -

Total - 100% 1,000 100%

19 | P a g e

Management Team

Fund Manager:

Brent D. Preston

Brent D Preston brings over 5 years of direct distressed asset acquisitions experience to the management

team. Upon completion of high school in Texas in 1999, he attended Texas Tech University’s Rawls

School of Business, and graduated Cum Laude in Management. While attending college he began his real

estate career in the acquisition of distressed single family assets, he then develop a system of pooling

owner financed notes and selling to larger firms who securitized and sold in the secondary market. During

this timeframe he also proceeded to become a licensed real estate agent and later a licensed real estate

broker in the State of Texas.

In 2005 he created The FlagStar Group, Real Estate Services LLC, which later became Property

Management Inc (PMI). PMI is a full service management and brokerage firm focusing on the

multifamily sector of the marketplace. PMI provides a full range of services to the industry including:

property management, accounting/administrative support, construction management, repositioning

strategy, feasibility services, asset management, property tax consulting, and brokerage services.

In addition to PMI, Mr. Preston is engaged in multiple projects all centered on the repositioning of

distressed real estate assets. He has a profitable track record of successful asset repositioning and

disposition, impressive to the most seasoned investor. See Appendix A for a summary of some notable

transactions Mr. Preston has completed

Partner/Analyst:

Aaron Morris

Aaron Morris is actively involved in the operational side of PMI, he has a Texas real estate license

and is a graduate of Texas Tech University. Aaron began his real estate career in the brokerage

business, working at a large multi-national brokerage firm. He then joined the PMI team, and expanded

his expertise into operational management, and project underwriting.

Mr. Morris began Morris consulting in early 2006; he is currently engaged in multiple real estate

repositioning projects throughout Texas. He is a key element in maintaining acceptable deal flow and

underwriting of potential acquisitions.

Investor Relations:

Eric Morris

Eric Morris recently ended his career as a professional football player; he formerly played division 1

football at Texas Tech University, where he was a two year starter. He brings a dynamic background to

the Fund and will be engaged as investor relations liaison and will also assist Aaron Morris in

underwriting potential acquisitions.

20 | P a g e

Controller/PMI Liaison:

Wendy Hinkle

Wendy Hinkle started out her real estate career in the brokerage sector, handling mostly residential

transactions. She later joined The FlagStar Group in 2005 as executive assistant to Mr. Preston. Ms.

Hinkle holds a Texas real Estate License.

Throughout the years Ms. Hinkle’s capacity within The FlagStar Group, and then PMI, has grow. She

will oversee all aspects of the PMI/Scarlet Matador Fund relationship. Ms. Hinkle has many years of

hands on experience in the repositioning of multifamily assets, under the guidance of Mr. Preston.

See Appendix D for Advisory Board positions.

21 | P a g e

SUBSCRIPTION DOCUMENTS

Each person desiring to purchase Preferred Units (“Units”) must complete, execute, acknowledge, and

deliver to the Fund a Purchaser Questionnaire, Subscription Agreement and other documents in the forms

contained in the Subscription Documents attached hereto. By executing the Subscription Agreement,

each subscriber is agreeing that, if the Subscription Agreement is accepted by the Fund, he or she will

become a Unit Holder of the Fund. The Fund, in its sole discretion, may reject a prospective purchaser’s

Subscription Agreement. If the Offering is oversubscribed, the Fund may either reject the subscriptions

of prospective purchasers of its choosing, reduce each prospective purchasers subscription pro rata, or

some combination of the foregoing.

INTEREST AND CORPORATE ACCOUNT

All proceeds from the sale of Units up to $500,000 (the “Minimum Offering”) will be deposited in an

escrow interest bearing account until the Minimum Offering is subscribed for ($500K). Once the

Minimum Offering has been subscribed for all proceeds will immediately deposited into the Fund’s

corporate account and made available to the Fund.

ABILITY TO ACCEPT LIMITATIONS ON TRANSFERABILITY

It is unlikely that investors will be able to liquidate their investments in the Units in the event of an

emergency. A public market for the Units does not exist and there is no assurance that one will ever

develop. Moreover, the transferability of the Units will be affected by restrictions on resale imposed

under federal and state securities laws.

ABILITY AND WILLINGNESS TO ACCEPT RISKS

The economic benefit from an investment in the Fund depends upon many factors beyond the control of

the Fund. Accordingly, the suitability for any particular investor of a purchase of the Units will depend

upon, among other things, such investor’s investment objectives and such investor’s ability to accept

speculative risks.

FURTHER INFORMATION

Each prospective investor and purchaser representative is invited to ask questions of, and receive answers

from, the officers of the Fund and to obtain such information concerning the terms and conditions of the

Offering to the extent the Fund possesses the same or can acquire it without unreasonable effort or

expense, as such prospective investor or purchaser representative, as the case may be, deems necessary to

verify the accuracy of the information in this Memorandum. An appointment for such purposes will be

arranged upon request.

(THIS SPACE LEFT INTENTIONALLY BLANK)

22 | P a g e

OTHER SPECIFICS OF THE OFFERING

Underwriting: All underwriting expenses associated with this offering will be paid by the Company out

of this offering or other resources.

Legal Matters: The Company is not currently involved in any litigation or legal proceedings and is not

aware of any litigation pending or threatened against it.

Company Accounting Period: The Company’s fiscal year end is December 31.

Annual Reports: The Company intends to transmit to its Unit Holders annual reports containing financial

statements as soon as practicable after the end of each fiscal year. The Company’s fiscal year ends

December 31. In addition, the Company also intends to make other periodic reports to its Unit Holders at

the sole discretion of Management.

Working Capital and General Corporate Purposes: The Company plans to use the capital provided by

this Offering for development, advertising and marketing, accounts payable or other working capital and

general corporate purposes that management determines are in the best interest of the Company.

In the opinion of management of the Company if the maximum number of Units being offered is sold, the

Company may have sufficient working capital to achieve its expanded operations. However, there can

be no assurance that even if the maximum number of Units is sold that the Company would not be

required to seek alternative sources of financing. Management is not restricted in the application of the

funds as provided within this Memorandum under the caption “Use of Proceeds” elsewhere in this

Memorandum.

There can be no assurance, express or implied, that if management were to require additional financing

that management would not be required to subordinate the interests of those Units sold hereby to some

subsequent financing or credit facility.


23 | P a g e

DESCRIPTION OF CAPITAL STOCK

Unit Holders have one vote per Unit on all matters to be voted upon by the Unit Holders. They are

entitled to receive ratably such dividends, if any, as may be declared from time to time by the Managing

Member out of funds legally available thereof. In the event of a liquidation, dissolution or winding up of

the Fund, the holders of Preferred Units (“Units”) are entitled to share ratably in all assets remaining after

payment of liabilities. The Units has no preemptive or conversion rights or other subscription rights.

There are no redemption or sinking fund provisions available to the Units. When fully paid for, all of the

outstanding Membership Interests to be issued upon the funding of the private placement hereunder will

be validly issued within 4 weeks, fully paid and non-assessable.

Preferred Units - The Company has Preferred Units.

Preferred Unit Holders will receive a + 6.5% annual return on “vested” funds, to be paid monthly,

quarterly, or annually (to be determined once operations are underway in the Managing Member’s full

discretion). “Vested” mean when funds are actually allocated to acquire a specific property. Example:

the LLC received $500,000 in subscriptions in 30 days. An additional 30 days pass prior to the closing of

Fund for this first acquisition. Investors would not receive a preferred return until after closing on this

first property.*

* Example: the first property requires $400K in capital, the 6.5% preferred return will be computed on a pro-rata share of total

$500K invested.

RIGHTS OF UNIT HOLDERS

The Company, at its option, may answer all inquiries from prospective investors and/or their authorized

representatives concerning the Offering, the Company and any matter relating to the offer and sale of the

Units and may afford, at its option, the prospective Investors and/or their authorized representatives the

opportunity to obtain any additional information necessary to verify the accuracy of any representation or

information set forth in this Memorandum.

TRANSFER AGENT

The Company, through its Secretary or other authorized person, shall serve as the register and transfer

agent for the Units.

DIVIDENDS

The Company has to date not paid dividends nor does it expect to in the immediate future.

DILUTION

If the Managing Member of the Company elects to issue additional Units and extend the offering by

allowing the sale of additional Membership Interests as provided for under Terms of the Offering, each

Investor may suffer a dilution of his or her interest in the Company.


24 | P a g e

Tax Considerations

Tax Considerations

The following discussion summarizes the material federal income tax aspects to the Members of an

investment in the Company. This summary is based upon the Internal Revenue Code of 1986, as amended

(the “Code”), the regulations there under, published administrative rulings, and judicial decisions in effect

on the date of this Memorandum. No assurance can be given that future legislative or administrative

changes or court decisions will not significantly modify the discussion contained herein. Any such

changes may or may not be retroactive with respect to transactions completed prior to the dates of any

such changes.

The following discussion does not purport to deal with federal income tax consequences applicable to all

categories of investors, some of which may be subject to special rules (for example, insurance companies,

banks, foreign taxpayers and tax-exempt entities), nor does it discuss any aspect of state, local or foreign

taxation. This summary is included for general purposes only and is not intended as a substitute for

careful tax planning.

PROSPECTIVE INVESTORS ARE URGED AND ADVISED TO CONSULT THEIR OWN TAX

ADVISORS, LAWYERS OR ACCOUNTANTS WITH SPECIFIC REFERENCE TO THEIR OWN

TAX SITUATIONS.

Classification as a Limited Liability Company

The Company is a limited liability company formed under the law of the State of Texas.

State and Local Taxes

In addition to the federal income tax consequences described above, prospective investors should

consider potential state and local tax consequences of an investment in the Company. State and local laws

often differ from federal income tax laws with respect to the treatment of specific items of income, gain,

loss, deduction and credit. The Company may be subject to state and/or local tax, depending on the

location and scope of the Company’s activities. In addition, a state in which a Member is not a resident

but in which the Company may be deemed to be engaged in business may impose a tax on that Member

with respect to his/her/its share of partnership income derived from that state. Under some circumstances,

a Member with tax liabilities to more than one state may be entitled to a deduction or credit for taxes paid

to one state against the tax liability to another.

THE FOREGOING IS A BRIEF SUMMARY OF CERTAIN MATERIAL INCOME TAX MATTERS

WHICH ARE PERTINENT TO PROSPECTIVE INVESTORS. THE SUMMARY IS NOT, AND IS

NOT INTENDED TO BE, A COMPLETE ANALYSIS OF ALL PROVISIONS OF THE FEDERAL

INCOME TAX LAW WHICH MAY HAVE AN EFFECT ON SUCH INVESTMENTS. THIS

ANALYSIS IS NOT INTENDED AS A SUBSTITUTE FOR CAREFUL TAX PLANNING.

ACCORDINGLY, PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR OWN

RESPECTIVE TAX ADVISORS WITH RESPECT TO THEIR OWN RESPECTIVE TAX

SITUATIONS AND THE EFFECTS OF THIS INVESTMENT THEREON.

25 | P a g e

ADDITIONAL INFORMATION

During the course of the Offering and prior to any sale, each offeree of the Preferred Units (“Units”) and

his or her professional advisor(s), if any, are invited to ask questions concerning the terms and conditions

of the Offering and to obtain any additional information necessary to verify the accuracy of the

information set forth herein. Such information will be provided to the extent the Fund possess such

information or can acquire it without unreasonable effort or expense.

Each prospective investor will be afforded, and should seek, the opportunity to obtain any additional

information which such prospective investor may reasonably request, to ask questions of, and to receive

answers from, the Fund or any other person authorized by the Fund to act, concerning the terms and

conditions of the Offering, the information set forth herein and any additional information which such

prospective investor believes is necessary to evaluate the merits of the Offering, as well as to obtain

additional information necessary to verify the accuracy of information set forth herein or provided in

response to such prospective investor’s inquiries. Questions regarding this Offering should be directed to:


Mr. Brent D Preston

7111 Santa Fe Dr

Lubbock, TX 79407

Tele: 806-470-0464

[email protected]

26 | P a g e

Exhibit A

BUSINESS PLAN


27 | P a g e

Company Overview

The current national economic woes have created a tremendous opportunity, specifically within the

multifamily real estate and multifamily capital marketplace. Market conditions along with the current

administration has created a significant yield spread/pricing gap between stabilized, well operated

properties and distressed multifamily assets. Agency lenders such as Fannie Mae and Freddie Mac are

producing over 80% of multifamily loan volume. The remaining 20% of volume is distributed between

HUD, regional and national portfolio loans, hard money and bridge lenders, and local interim bank

financing. This capital distribution model offers a very competitive array of options for the acquisition of

stabilized multifamily assets, but offers very little options for the acquisition of distressed multifamily

assets. The multifamily property market has adjusted to this capital marketplace and prices for quality

distressed asset buyers have significantly dropped to generational lows, while stabilized multifamily asset

prices have dropped much less.

Scarlet Matador Fund’s management team has over 10 years experience is the successful identification,

acquisition, renovation, stabilization, management, marketing, and disposition of distressed multifamily

assets. The management team’s deal-flow has outgrown their capital resources and has elected to create

the Scarlet Matador Fund, LLC to exploit the current inefficiency that they have identified within the

market.

Property Management Inc (PMI) is a wholly owned company of fund management; they provide 3rd

party

services to the multifamily industry such as: property management, construction management,

bookkeeping/accounting, and brokerage services. PMI has been engaged to provide all of these services

to all assets owned by Scarlet Matador Fund, LLC. This will not only streamline the Fund’s operations

but will eliminate any “overhead” or administrative expenses for the Fund.

Need

These uncanny market conditions have created a solid opportunity for sophisticated investor/buyers that

have a real understanding of the complex dynamics of today’s multifamily marketplace. Distressed assets

buyers in this marketplace are filling a direct need of the marketplace, creating a previously unseen

opportunity for the creation of tremendous stakeholder wealth. Many unconventional sellers such as

special servicers, receivers, lenders, banks, federal agencies, and so on are in dire need of experienced

operators to acquire these distressed assets at significantly below market prices, in order to clean up

balance sheets of lending institutions. They are increasing only seeking to deal with experienced

distressed asset buyers that can move quickly and can be depended on to close. These relationships are

one of the key factors in the Scarlet Matador Fund’s management’s previous

success.

Solution

The basic business model for the Scarlet Matador Fund, LLC is one that has been

created and adopted by the management team of the Fund. There are always minor

inefficiencies within the multifamily capital and real estate markets, but today’s

other economic conditions have drastically magnified these inefficiencies. Fund management has been

involved in this specific industry for over ten years and has completed multiple successful rounds of

acquisitions and dispositions.

Fund management has recognized the rare opportunity in today’s marketplace and has exploited the

opportunity to their fullest ability. They currently have four large projects going. Their deal-flow and

management capabilities are far greater than their own capital resources. As a result they have formed the

Scarlet Matador Fund,

LLC; taking full advantage

of the inefficiencies in

today’s capital

marketplace

28 | P a g e

Scarlet Matador Fund, LLC to not only seize the current opportunities of today’s marketplace, but also to

create investor wealth.

Market

Scarlet Matador Fund, LLC’s ultimate goal is to acquire assets at deep discounts and in turn re-sell them

at marketable prices for a large capital gain. This objective is more widely possible due to the unusual

circumstances of the current capital marketplace. The market for these distressed assets is a very tightly

knit community, mostly relationship driven. Unconventional sellers previously turned to more traditional

marketing methods such as broker networks, MLS databases, and internet databases. These methods have

proven successful for marketing stabilized, well operated properties to conventional investors seeking

stabilized market returns. But these methods have proven to be far less successful in disposing of

distressed multifamily assets. This is due to the fact that the vast majority of stabilized asset investors do

not understand the acquisition and repositioning of said multifamily assets.

Distressed asset sellers were overwhelmed with multiple “over market” offers from foreign and domestic

“syndicate groups” that had never even seen marketed property. They were overwhelmed in sorting

through potential purchasers trying to determine the credibility of numerous unqualified offers. These

sellers soon realized the importance of dealing with professional investors, with seasoned track-records; a

buyer that they could count on offers being real and count of a seamless closing.

These market circumstances have in turn drastically eroded pricing on distressed assets along with

circumstances previously discussed regarding the capital marketplace.

Competitive Advantage

Scarlet Matador Fund, LLC’s competitive advantage within this niche marketplace is our ability to be

nimble and act quickly. The management team’s deep experience in distressed assets has garnished them

the investor confidence to move quickly and avoid a bureaucratic underwriting model that is prohibitive

to meeting market demands.

Their relationship with PMI also affords them the ability to reduce operating cost and avoid spending

unnecessary time building a corporate infrastructure at the cost of the fund and investors. Fund

management can devote all of their time and resources to fund assets.

Another important advantage of Scarlet Matador’s relationship with PMI is the comprehensive approach

that they take to the renovations, stabilization, management, and accounting of each subject property.

PMI offers comprehensive asset management services to the Fund at below market pricing that far

exceeds market quality.

Revenue Model

Scarlet Matador Fund, LLC operates on a variety of revenue models:

The primary, most significant revenue source is the acquisition and re-sell of fund assets. This is

typically a 20 month or less cycle and includes: acquisition, renovation, stabilization, marketing,

and disposition. The bulk of investor returns will be generated via this revenue model; all capital

gains will be paid out in dividends on a proportionate equity ownership basis upon each sale.

Each property will also generate its own individual income, investor distributions will also be paid

on access cash flow dividends.

Investors will also be paid on preferred equity, upon being vested. These dividends will be paid via

operating income of said properties.

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Financials

Scarlet Matador Fund, LLC will launch its investment activities upon the successful raise of

$500,000.00, it will then proceed to continue raising the target amount of $9,890,000.00

The Fund will leverage its funds to maximize investor/principal returns.

The management team currently has the necessary deal flow to acquire maximum fund assets in a

maximum of a 12 month period. Preferred returns will be generated as soon as funds are vested into

said projects, cash flow dividends will be generated upon stabilization of Fund assets, and capital

gains income will be generated roughly 20 months from initial investment.

Exit

Scarlet Matador Fund, LLC is a fixed life opportunity fund, and aims to return invested capital at the end

of fund operations. The management team anticipates being able to, at minimum, turn through principal

investment, two times, before the predetermined five year lifecycle of the fund.

People

Brent D Preston, Managing Member and Fund Manager – Mr. Preston is a seasoned multifamily asset

manager with a successful track record in repositioning distressed multifamily assets. He also brings a

strong property management and construction management background to the fund. He is primary owner

of Property Management Inc (PMI) who provides a suite of industry services to his current projects and to

other 3rd

party property owners. Mr. Preston is a Cum Laude graduate of the Rawls School of Business at

Texas Tech University and an active Texas Real Estate Broker.

Partner/Analyst:

Aaron Morris

Aaron Morris is actively involved in the operational side of PMI, he has a Texas real estate license

and is a graduate of Texas Tech University. Aaron began his real estate career in the brokerage

business, working at a large multi-national brokerage firm. He then joined the PMI team, and expanded

his expertise into operational management, and project underwriting.

Mr. Morris began Morris consulting in early 2006; he is currently engaged in multiple real estate

repositioning projects throughout Texas. He is a key element in maintaining acceptable deal flow and

underwriting of potential acquisitions.

Investor Relations:

Eric Morris

Eric Morris recently ended his career as a professional football player; he formerly played division 1

football at Texas Tech University, where he was a two year starter. He brings a dynamic background to

the Fund and will be engaged as investor relations liaison and will also assist Aaron Morris in

underwriting potential acquisitions.

Controller/PMI Liaison:

Wendy Hinkle

Wendy Hinkle started out her real estate career in the brokerage sector, handling mostly residential

transactions. She later joined The FlagStar Group in 2005 as executive assistant to Mr. Preston. Ms.

Hinkle holds a Texas real Estate License.

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Throughout the years Ms. Hinkle’s capacity within The FlagStar Group, and then PMI, has grow. She

will oversee all aspects of the PMI/Scarlet Matador Fund relationship. Ms. Hinkle has many years of

hands on experience in the repositioning of multifamily assets, under the guidance of Mr. Preston.

Advisory Board

See Appendix B for Advisory Board biographies.

Milestones

Milestone Timing Funding Required

Fund Formation & Legal Prep Q4, 2009 Funded by Management

Fundraising Launch Q1, 2010 $500,000

Fund begins Investments Q2, 2010 Deal Specific

Fund Max Capitalization Q2, 2010 $9,980,000

Fund Operations Q2, 2010-

Q3, 2014

Exit Strategy Q4, 2014

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Infrastructure/Use of Funds :

Use of Funds: All funds contributed by preferred equity investment will be used for the direct

acquisition and renovation of fund assets. Funds will not be used for administrative

expenses, management salaries, or overhead.

Initial “start-up” costs are being funded by management.

Scarlet Matador Fund, LLC will operate with minimal employees and minimal overhead.

Employees: Brent Preston, Fund Manager

Aaron Morris, Junior Fund Manager

Eric Morris, Investor Relations

Wendy Hinkle, Controller/PMI Liaison

Office Space: 7111 Santa Fe Dr, Lubbock, TX 79407 (Fund Managers Office) no cost to fund

Approximately 6000 sq ft.; adequate space and resources (Computers, Phones, Etc.)

Outsourced: All of the operational, administrative, construction, management, and marketing

elements of the fund will be outsourced to Property Management Inc. on a deal specific

basis. PMI will be paid a “market” fee for services. (Operational Management -4%,

Construction Management – Cost +) All of the fees will be paid via operating income of

each specific property owned by the fund.

PMI: Property Management Inc is an all inclusive management company owned and operated

by Brent Preston. They offer a gamete of specialized services catering to the multifamily

industry:

Project Management Construction Management

Property Management Regional Management

Back-office Support Accounting/Bookkeeping

Brokerage Services Feasibility Studies

Marketing

PMI Staff:

Brent Preston, President

Aaron Morris, VP Operations

Wendy Hinkle, VP Regional Management

Katye Jarrell, Controller

George Castillo, Construction Superintendent

Tommye Parker Woods, Property Manager

Regina Nelson, Property Manager

Codi Bullard, Property Manager

Sarah Cook, Property Manager

Amber Smith, Assistant Property Manager

Johnny Faulkner, Maintenance

Martin Guel, Maintenance

Mark Capps, Maintenance

Luis Alcazar, Maintenance

Joe Chandler, Maintenance

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Entire Constructions staff is either 1099 employees and/or contractors

Structure: Texas Limited Liability Company, formed December 17, 2009.

Fund Management (Brent Preston, Aaron Morris, and Eric Morris) to collectively own

50.1% (Market) of Fund

49.9% (market) to be offered.

33 | P a g e

Plan of Operation

Scarlet Matador Fund, LLC is a newly formed “opportunity fund” that is raising capital for the purpose of

investing in distressed multifamily assets. The Fund is newly formed and has not yet made any

investments or generated any return, thought the Fund manager is currently active in this niche

marketplace and posses a very successful track record in doing so. The proceeds from this Offering are

expected to satisfy all of the cash needs for the entire lifecycle of the Fund (5-years).

Scarlet Matador Fund, LLC is an investment fund that will identify, acquire, reposition, and re-sell

distressed multifamily assets, under the guidance of Fund Manager, Brent D Preston. The Fund intends on

investing in two rounds of investment during the 5-year lifecycle of the Fund. During this 5-year lifecycle

the Fund will pay out preferred interest, cash flow dividends, and all capital gains from the re-sell of

assets; it will retained original principal invested equity for re-investment in round two. All originally

invested principal funds will be returned before the end of the fund lifecycle (5 years). Scarlet matador

Fund will own specific assets via owning 100% of units in Single Purpose Entity’s (SPE), LLC’s, created

specifically for ownership in each asset.

Scarlet Matador Fund, LLC will utilize all feasible opportunities to use 3rd

party debt leverage to

maximize returns for stakeholders. 3rd

party debt providers may consist of local community banks,

regional banks, national banks, institutional lenders, assumption of current debts, asset based lenders, hard

money lenders, bridge lenders, AITD financing, owner carry loans, and so on.

Scarlet Matador Fund, LLC will operate fully transparent to investors, they will receive monthly

operating reports, professionally prepared by Property Management Inc.


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Market Analysis

Industry Defined:

Scarlet Matador Fund, LLC will operate within the multifamily marketplace, primarily in the Texas and

the Midwest. Distressed assets within this marketplace are victims of the current turmoil within the

capital marketplace. The absence of attractive bridge and interim financing options have created a

significant pricing gap between stabilized assets, that qualify for attractive agency financing, and

distressed, sub-performing, assets.

Scarlet Matador Fund, LLC’s management team has actively been involved within this marketplace.

Even in the greatest of economic times, in the most liquid market environment, poor operators created

opportunity in the acquisition and repositioning of distressed assets. Fund management has been

acquiring, repositioning, and re-selling troubled assets for over 10 years, operating within a modest deal

flow model using their own leveraged capital. Today’s economic circumstances have created an uncanny

opportunity for fund management to leverage their market knowledge and experience and 3rd

party equity

investors, looking to capitalize on distressed multifamily assets, to create an enormous wealth creation

mechanism, the Scarlet Matador Fund, LLC.

Target Market:

Scarlet Matador Fund, LLC has a complex target market that is very complex and codependent in nature.

The ultimate target market is multifamily investors seeking stabilized multifamily assets that provide

cash-flow, appreciation exposure, tax shelters, and leveraged real property returns. This target market is

highly dependant on specific market characteristics such as available long-term debt/financing options

and availability, availability of performing assets available on the open market, and ultimately the micro

and macro characteristics of the rental markets in said sub-markets. Multifamily assets value is a function

of the income that it produces and the availability of capital to acquire such assets.


35 | P a g e

Marketing Plan

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The Purpose of this plan is to quantify and explain to potential investors the deal flow mechanism used by

Scarlet Matador Fund, LLC to identify attractive distressed multifamily projects. The old adage “you

make your money when you buy it” is profoundly correct in the distressed asset repositioning and re-sell

business; hence our marketing plan is focused on acquisitions. The disposition element of our business

plan is comprehensively handled by PMI, who has vast expertise in the maximized disposition on

stabilized multifamily assets.

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We will be targeting three primary distressed asset/ non-conventional seller groups:

Special Servicers (CMBS servicers, etc..)

Conventional REO sellers

Other Distressed ownership: Estates, Portfolio Liquidation, Auctions, Condemnations, Etc..

TThhee PPllaann

Adequate deal flow is one of the key functions of the Scarlet Matador Fund, LLC. Fund management has

created this deal flow through a successful track record of purchasing distressed assets from non-

conventional sellers and proving their ability to move quickly and perform as represented.

The bulk of deal flow will be fruits of these delicate relationships that fund management has successfully

created over the previous 5 years. The specific identities of these contacts are a much protected trade

secret of Fund management but here are a few examples of these contacts:

Special Servicers of CMBS defaults

Institutional brokers

Asset managers of REO assets

Court appointed Receivers

Fund Management has created a basic model of the characteristics that they seek in potential acquisitions,

their network of unconventional sellers and brokers present such deals to Fund Management.

Management reviews many deals, and when one somewhat meets criteria on paper they immediately

schedule a site visit for further review by management team.

All identification, underwriting, and acquisition procedures are handled directly by senior Fund

Management, specifically Mr. Preston.

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SWOT Analysis

This SWOT analysis summarizes Scarlet Matador Fund, LLC’s (“Fund”) current situation it regard to our internal

strengths and weaknesses along with identifying the potential opportunities and threats that exists in our marketing

environment. Due to the fact that the Fund’s management team is currently successfully investing in distressed

multifamily assets and has an extremely successful extended track record in doing so, the opportunities are high and

the threats are low.

Strengths

1. Fund Manager, Brent Preston, has extensive knowledge

and experience in distressed multifamily assets.

2. The Fund’s relationship with PMI allows opportunity to

maximize invested funds by eliminating normal overhead

and operational expenses associated with launching a new

venture.

3. Mr. Preston has established numerous key relationships

with distressed asset sellers and has achieved a consistent

ant deal flow mechanism.

Capitalize Strengths

1. Mr. Preston will guide the Fund in the right direction in

order to achieve greatness.

2. The pre-existent professional staff has an in depth

understanding of the overall deal management of

distressed assets; the entire key infrastructure is already

in place.

3. The creation of the Fund will allow Mr. Preston to

maximize his established relationships in identifying

substantial below market transactions and create

enormous stakeholder wealth.

Weaknesses

1. Lack of guaranteed preferred leverage.

2. Lack of “Opportunity Fund” operational experience/track

record.

Address Weaknesses

1. The Fund is currently establishing relationships with

multiple debt sources, fund objectives still make

financial sense on all cash/equity, worst case basis.

2. Fund Management will apply all of its past experience

to the objectives of the Fund.

Opportunities

1. Current market conditions have created the “perfect

storm” in the multifamily industry.

2. Special servicers are faced with liquidating a growing

number of CMBS financed properties, at incredible

“below market” pricing.

3. Multifamily operations are minimally effected by a down

economy; people still have to have a place to live. Tighter

credit standards have actually grow the tenant base at the

expense of the homeowner pool declination.

Maximize Opportunities

1. The Fund is able to acquire distressed assets at ALL

TIME lows, and re-sell at stabilized market pricing.

2. The Fund can maximize this pricing gap and turn

through transactions as quickly as possible, with a

dependable deal flow.

3. The fund will maximize operational revenues through

PMI’s management and leadership, in doing so

increase market benchmarks such as NOI’s and

GRM’s.

Threats

1. A decline in the availability of stabilized multifamily

Minimize Threats

1. Part of the Funds underwriting criteria looks at the

actual mechanics of each Fund acquisition, and value is

37 | P a g e

asset debt options.

2. Competition from Larger “Opportunity Fund”

organizations.

real, not created by a subsidized or artificial cost of

funds

2. Fund Management realizes that there are other similar

and larger competing firms, our edge on those

organizations is keeping things simple and staying

nimble. Reaction time is so crucial in dealing with

distressed asset acquisition.


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Exit Strategy

The #1 objective for Scarlet Matador Fund, LLC is to build an exceptional investment vehicle for

sophisticated investors to passively take advantage of the tremendous opportunities created by the turmoil

in today’s multifamily capital marketplace. Fund management intends on turning leveraged equity capital

a minimum of two times with in the 5-year fund lifecycle.

The ROI strategy is as follows:

(i) Capital Return. The primary fund objective is to acquire, reposition, and re-sell Fund assets; hence

this is the most significant return mechanism for stakeholders. Investors will be paid a prorata share of all

capital gains earned form the re-sell of each Fund asset. Estimated prorate share of gains for the life of the

fund total approximately $8,600,000.00

(ii) Preferred Unit Interest Return. Investors will receive a 6.5% preferred unit return on all vested

funds. This return will be computed and paid monthly. Total estimated preferred interest will be

approximately $2,172,080.00 over the 5 year life of the Fund.

(iii) Cash Flow Dividends. Investors will be paid a prorata dividend on property cash flow between the

stabilization phase and the disposition of individual Fund assets. Gross dividends to investors are

estimated to be $742,457.88.

The following total return compilation is based on $9.98M invested. .

ROI

Capital

Return

$8,600,000.00

Interest

Return

$2,172,080.00

CF Dividend $742,457.88

TOTAL ROI $11,514,537.88

Total Project ROI is based on projected liquidated fund at the end of the 5 year life-cycle, and Scarlet

Matador fund, LLC’s conservative approach specific project timeframes.

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Appendix A

Additional ROI Information

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Appendix B

Additional Biographical Information on the Fund Manager, Mr. Brent Preston

In addition to PMI, Mr. Preston is engaged in multiple projects all centered on the repositioning of

distressed real estate assets. He has a profitable track record of successful asset repositioning and

disposition, impressive to the most seasoned investor. Below is a summary of some notable transactions

Mr. Preston has completed:

Ponderosa Apartments:

Location: Big Spring, TX

SPE: Greasewood Properties 1, LLC

# Units: 78

Capacity: Managing Member

Purchase Date: 2006

Purchase Price: $925,000.00

Renovation Costs: $300,000.00

Total Cost: $1,225,000.00

Sale Date: 2007

Sale Price: $2,250,000.00

Gross Profit: $1,025,000.00

NOI: $230,000.00

Garden Court Apartments:

Location: Midland, TX

SPE: IPE Midland 1, LLC

# Units: 74


Purchase Date: 2007

Purchase Price: $1,300,000.00


Total Cost: $1,550,000.00

Sale Date: 2008

Sale Price: $2,820,000.00

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NOI: $275,000.00

Cielo Vista Townhomes:

Location: Odessa, TX

SPE: IPE Cielo Vista, LLC

# Units: 56


Purchase Date: 2007

Purchase Price: $900,000.00


Total Cost: $1,100,000.00

Sale Date: 2008

Sale Price: $1,855,670.00

Gross Profit: $755,670.00

NOI: $175,000.0

Briarwood Village Apartments:

Location: Odessa, TX

SPE: IPE Odessa 1, LLC

# Units: 74


Purchase Date: 2007


Renovation Costs: $1,200,000.00

Total Cost: $2,350,000.00

Sale Date: 2009 (In escrow to sell)

Sale Price: $3,800,000.00


NOI: $355,000.00

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Chaparral Apartments:

Location: Lubbock, TX

SPE: Lubbock Chaparral Apartments, LLC

# Units: 118


Purchase Date: 2009



Total Cost: $2,275,000.00

Sale Date: Not For Sale (yet)

Current Valuation: $3,500,000.00 (based on 10% CAP)

Gross Equity: $1,225,000.00

NOI: $350,000.00

The Townhomes at O’Neil Terrace (formerly The Wellington Apartments):

Location: Lubbock, TX

SPE: LWA, LLC

# Units: 93


Purchase Date: 2009



Total Cost: $1,750,000.00




NOI: $280,000.00

The Brentwood Apartments:

Location: Fort Worth, TX

SPE: FW Brentwood Apartments, LTD

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# Units: 180

Capacity: Managing Member of GP

Purchase Date: 2009


Renovation Costs: $1,500,000.00

Total Cost: $3,000,000.00




NOI: $500,000.00

*More non-multifamily distressed asset acquisitions & dispositions available: raw land, single-family

portfolio, and note portfolio.

--------------------------------

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RESUME

Brent D. Preston

8404 CR 7000

Lubbock, TX 79407

806-470-0464

Email: [email protected]

SUMMARY OF QUIALIFCATIONS

Strong background in commercial real estate ownership and management.

Innovative and entrepreneurial appetite, coupled with extensive financial and managerial skills.

PROFESSIONAL EXPERIENCE

Principal Broker/Managing Member 2005-Present

Property Management Inc. (West Texas Franchise) [The FlagStar Group, Real Estate Services]

Lubbock, TX

Provider of fee management services, specifically multifamily assets in West Texas.

Complete and supervise construction management services; apartment rehabs and renovations.

Oversee all accounting and bookkeeping in corporate office.

Oversee and manage the day-to-day management activities of subordinates.

Managing Partner/Managing Member 2006-Present

Greasewood Properties, LTD / Greasewood Holdings, LLC

Lubbock, TX

Assist in the identification, acquisition, rehabilitation, and disposal of a variety of multi-family and

commercial real estate re-development projects.

Developed several residential sub-divisions and single-family tract projects; from concept through

completion.

Managing Partner/Managing Member 2005-Present

Cowhouse Properties, LTD

Lubbock, TX

Participate in the re-development of multiple farm and ranch properties located throughout West Texas.

Designed and implemented strategic acquisitions initiative.

Managed the acquisition, rehabilitation, and asset management of over 150 single family houses.

President/CEO 2004-Present

Preston and Preston Credit and Debt Solutions, Inc.

Lubbock, TX

Supervise acquisition and management of all company owned rental properties.

Provide affordable housing solutions to lower middle class.

EDUCATION

BBA Management, 2004 (Cum Laude) Texas Real Estate Brokers

License

Texas Tech University, Rawls College of Business

Lubbock, TX

mailto:[email protected]

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Appendix C

Supporting Articles on the Market

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Appendix D

Advisory Board

56 | P a g e

Exhibit B & C

Purchaser Questionnaire & Subscription Agreement


57 | P a g e

Exhibit B


CONFIDENTIAL SUITABILITY QUESTIONNAIRE

THIS QUESTIONNAIRE DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION

OF AN OFFER TO BUY A SECURITY OR MAKE A LOAN. ITS SOLE PURPOSE IS TO

ESTABLISH WHETHER THE PERSON ANSWERING THIS QUESTIONNAIRE IS AN

ACCREDITED INVESTOR.

ALL INFORMATION CONTAINED HEREIN WILL BE KEPT STRICTLY CONFIDENTIAL.


Mr. Brent D Preston

7111 Santa Fe Dr

Lubbock, TX 79407

Tele: 806-470-0464

Gentlemen/Ladies:

The undersigned (the “Prospect”) hereby agrees and acknowledges that Scarlet Matador Fund, LLC (or

the “Fund”) has the right to reject any offer for any reason. The undersigned acknowledges that the sole

purpose of this questionnaire is to determine if the undersigned is an “accredited investor” as that term is

defined by SEC Rule 501.

The undersigned represents and warrants that the information contained herein is true and correct and the

Scarlet Matador Fund, LLC will rely on the information contained herein provided by the undersigned.

Any false or misleading information provided by the undersigned could result in a violation of state and

federal laws. The undersigned prospect agrees to immediately notify Scarlet Matador Fund, LLC of any

material change in the information provided by the undersigned.

If the undersigned Prospect is a partnership, corporation, limited liability partnership, trust or other entity

the person executing this questionnaire represents and warrants to Scarlet Matador Fund, LLC that he or

she has the necessary power and authority.

Please indicate the form of ownership you typically hold you investments in:

_______ Individual

_______ Joint Tenants with right of survivorship

_______ Trust

_______ Entity - Type: ______________________

58 | P a g e

PART A

(ALL PROSPECTS AND JOINT PROSPECTS MUST COMPLETE)

1. Name of Prospect/s:

Date of Birth/s:

2. Home Address of Prospect/s:

Home Phone of Prospect/s:

3. Business Address of Prospect/s:

________________________________________________________________________

Business Phone of Prospect/s:

4. Employer and Occupation of Prospect/s:

5. Education Level (check applicable):

High school: ___

College: ___

Graduate: ___

Degrees held, if any: _______________

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6. Have you invested in a similar venture as Scarlet Matador Fund, LLC? Yes _____ No _____ (if

yes…please explain)_____

7. What is your gross 2007 and 2008 and 2009 income? 2007__________ 2008__________

2009__________

8. Estimate your investment experience by checking one below:

None ________

Limited ______

Good ________

Extensive_____

9. Estimate your investment knowledge by checking one below:

None ________

Limited ______

Good ________

Extensive_____

10. How did you hear about us? (check below):

Blog:_____

Press:_____

Other:______(explain)

Personal Contact/ Referral: _____

Website: _____

Other: ___________________________________

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PART B

The undersigned is an accredited investor because the undersigned satisfies one or more of the

following criteria. Please select one or more of the appropriate criteria:

_____ 1. The undersigned is a natural person whose current net worth, or current joint net worth of the

undersigned and spouse of the undersigned, is in excess of $1,000,000.

_____ 2. The undersigned is a natural person who individually for each of the last two years had income in

excess of $200,000 and reasonably expects to have income in the current year in excess of $200,000.

_____ 3. The undersigned is a natural person who had joint income with his spouse which was in excess of

$300,000 in each of the two most recent years and reasonably expects joint income of $300,000 in the current year.

_____ 4. The undersigned is an entity, such as a partnership, corporation or trust, in which all of the equity

owners of the entity are accredited investors under any of the foregoing subparagraphs.

_____ 5. The undersigned is an entity, such as partnership, corporation or trust whose purchase is directed by

a “sophisticated person”, which has total assets of $5,000,000 and was not formed for the specific purpose of

acquiring securities.

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PART C

Please indicate your investment experience with each of the following asset classes.

ASSET EXPERIENCE

Extensive Moderate Some None

Publicly Traded

Bonds

Publicly Traded

Stocks

Mutual Funds

Commodities

Options

Futures

Real Estate

Direct Investments in

Privately Placed

Securities of

Operating

Companies

(excluding

investment vehicles)

Hedge Funds

Private Equity Funds

(venture capital;

buyout; mezzanine;

special situation;

etc.)

Managed Futures

Funds

Natural Resources

Funds (oil; gas; etc.)

Fund-of-Funds (of

any type; excluding

mutual funds)

Other Privately

Placed Funds

(identify)

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I hereby certify that I have answered the foregoing questions to the best of my knowledge and that my answers and

information provided hereon are complete and accurate.

Dated this _____ day of ____________________, 2010

Signature of Prospect/s

Print name of Prospect/s

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Exhibit C


CONFIDENTIAL SUBSCRIPTION AGREEMENT

I hereby agree to purchase ________________ Preferred Membership Interest (hereon “Units”) of Scarlet

Matador Fund, LLC, a Texas limited liability company (the “Fund”), at a purchase price of $20,000 per

Unit, with a minimum investment of $40,000 for 2 (Two) Units for a total purchase price of

$______________. In fulfillment of the obligation to make such a purchase, I hereby tender the full

subscription amount in the form of a check, draft, or money order payable to the Fund.

Conditions to Receipt and Acceptance:

The offer to become a Unit Holder hereby made shall be deemed to be accepted by the Fund only upon the

Fund’s execution of the acceptance set forth below.

A. Representations and Warranties. I represent and warrant to the Fund as follows:

I declare that I am at least 21 years of age and am a bona fide RESIDENT of the United States of America

or foreign government recognized as such by United States of America and I am an accredited investor as

defined by the definitions below.

____________Initials

OR

I am or represent an organization, which meets or exceeds at least one of the accreditation requirements

contained within this subscription agreement.

(1) Initial all of the following that apply:

____________A bank as defined in section 3(a)(2) of the Act, or a savings and loan association or other

institution as defined in section 3(a)(5)(A) of the Act whether acting in its individual or fiduciary capacity;

a broker or dealer registered pursuant to section 15 of the Securities Exchange Act of 1934; a insurance

company as defined in section 2(100) of the Act; an investment company registered under the Investment

Company Act of 1940 or a business development company as defined in section 2(a)(48) of that Act; a

Small Business Investment Company licensed by the U.S. Small Business Administration under section

301(c) or (d) of the Small Business Investment Act of 1958; a plan established and maintained by a state, its

political subdivisions, or any agency or instrumentality of a state or its political subdivisions, for the benefit

of its employees, if such plan has total assets in excess of $5,000,000; an employee benefit plan within the

meaning of the Employee Retirement Income Security Act of 1974 if the investment decision is made by a

plan fiduciary, as defined in section 3(21) of such Act, which is either a bank, savings and loan association,

insurance company, or registered adviser, or if the employee benefit plan has total assets in excess of

$1,000,000 or, if a self-directed plan, with investment decisions made solely by persons that are accredited

investors;

_____________A private business development company as defined in section 202(a)(22) of the

Investment Advisers Act of 1940;

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_____________An organization described in section 501(c)(3) of the Internal Revenue Code, corporation,

Massachusetts or similar business trust, or partnership, not formed for the specific purpose of acquiring the

securities offered, with total assets in excess of $5,000,000;

_____________A director, executive officer, or general partner of the issuer of the securities being offered

or sold, or any director, executive officer, or general partner of a general partner of that issuer;

_____________A natural person whose individual net worth, or joint net worth with that person's spouse, at

the time of his purchase exceeds $1,000,000;

_____________A natural person who had an individual income in excess of $200,000 in each of the two

most recent years or joint income with that person's spouse in excess of $300,000 in each of those years and

has a reasonable expectation of reaching the same income level in the current year;

_____________A trust, with total assets in excess of $5,000,000, not formed for the specific purpose of

acquiring the securities offered, whose purchase is directed by a sophisticated person; and

____________An entity in which all of the equity owners are accredited investors.

(2) I have such knowledge and experience in financial and business matters that I am capable

of evaluating the merits and risks of my investment in the Fund, or I have obtained the advice of an

attorney, certified pubic accountant or registered investment advisor with respect to the merits and risks of

my investment in the Fund. ____________Initials

(3) I acknowledge that the Fund provided me with a copy of the Memorandum, which

discloses in reasonable detail all material details of the offering, at least forty-eight (48) hours before my

return of this executed Subscription Agreement to the Fund. ____________Initials

(4) I am purchasing the Unit solely for my own account for investment and not for the account

of any other person and not for distribution, assignment, or resale to others. I do not presently intend to

resell, transfer, or otherwise dispose of the Units. Prior to any such sale or transfer, I will deliver to the

Fund a written opinion of counsel stating that the securities registration requirements of the Federal

Securities Act of 1933 and of all applicable state laws including, but not limited to, any Uniform State

Securities Act, have been or are being met or that an exemption from such registration is available and that

the sale may proceed without violating any of the applicable state or federal securities laws.


(5) I understand and acknowledge that the Operating Agreement of the Fund places severe

limitations on my ability to transfer the Unit. ____________Initials

(6) I acknowledge that any certificates (if such should ever be created) evidencing Membership

Unit(s) shall bear a legend restricting the transfer of the Units. ____________Initials

(7) I and all of my advisors have had access to all information necessary to enable me to make an

informed decision to become a Unit Holder and a reasonable opportunity to ask questions of and receive

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answers from the Fund concerning the terms and conditions of this offering of the Units. All such questions

have been answered to my full satisfaction. ____________Initials

(8) I have the financial ability to bear the economic risk of my investment, including a possible loss of

my entire investment, have adequate means of providing for my current needs and contingencies, and have

no need for liquidity in my investment in the Fund. ____________Initials

(9) The Units constitutes an investment, and my financial situation enables me to bear the risks of this

investment. ____________Initials

(10) I understand that the offering has not been registered under the Securities Act of 1933, as amended

(the “Act”), nor the securities laws of any other jurisdictions. Instead, the offering is made in reliance upon

certain exemptions, including the exemption for federally “covered securities” under 4(2) Regulation D 506

and the accredited investor exemption 4(6) promulgated thereunder. I am aware and understand that the

Units for which I have subscribed are being sold to me in reliance upon the above referenced exemptions

and based upon my representations, warranties, and agreements hereunder. I am aware of the restrictions

on the sale, transferability, and assignment of the Units and that I must bear the economic risk of my

investment hereby for an indefinite period of time because the Units have not been registered under the

1933 Act. ____________Initials

(11) I understand that no federal or state agency has made any finding or determination as to the fairness

for investment in, or any recommendation or endorsement of, the Units. ____________Initials

(12) I acknowledge that neither the Fund nor any of its employees, managers, agents, or other affiliates

have made any oral or written representations to me or to any of my advisors which are inconsistent with

the Memorandum in any way. ____________Initials

(13) I have included with this Subscription Agreement my capital contribution in full to the Fund for the

Units. I understand that moneys will be escrowed until the Minimum Offering is subscribed for, after

which all funds may be used by the Fund immediately. ____________Initials

(14) To the extent I considered it advisable, I have reviewed the merits of this investment with my tax

and legal counsel and with an investment advisor. ____________Initials

(15) I understand and acknowledge that no public market for the Units currently exists and that there can

be no assurance that any public market for the Units will exist in the future. ____________Initials

(16) All of the information that I have provided to the Fund concerning myself, my financial position,

and my knowledge of financial and business matters, including the information contained herein, is correct

and complete in all material respects as of the date set forth at the end hereof, and I will immediately notify

the Fund of any adverse change in such information prior to the Fund accepting my offer to become a Unit

Holder. ____________Initials

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(17) I agree that all of the foregoing representations, warranties, agreements, undertakings, and

acknowledgments made by me shall survive my purchase of the Units. I further agree that if more than one

person is signing this agreement, each foregoing representation, warranty, agreement, undertaking, and

acknowledgment shall be a joint and several representation, warranty, agreement, undertaking, and

acknowledgment of each person signing this agreement. ____________Initials

(18) I declare that I was not induced or solicited to invest by any form of general solicitation or general

advertising, including but not limited to, any advertisement, article, notice or other communication

published in any newspaper, magazine or similar media or broadcast over the television or radio. Including

any seminar or meeting in which attendees had been invited by a general solicitation or general advertising.


(19) I declare that I understand Scarlet Matador Fund, LLC has a first right of refusal to purchase any

and all Units, which are noticed for sale or liquidation. ____________Initials

(20) I declare that I am not relying on the accuracy of the financial data contained within the pro forma

projections contained within Exhibit A of the Private Placement Memorandum dated January 1, 2010.


(21) By executing this Subscription Agreement, I hereby agree to become a Unit Holder of the Fund

under the existing Operating Agreement of the Fund and to be bound by the terms of such agreement as

though I were an original signatory thereto. ____________Initials

(22) I agree to indemnify and hold harmless the Fund, its promoters, Unit Holder, managers, and

affiliates or any one acting on their behalf from and against all damages, losses, costs, and expenses

(including reasonable attorney fees) that they may incur by reason of my failure to fulfill any of the terms or

conditions of this Agreement or by reason of any breach of the representations and warranties made by me

herein or in any documents provided by me to the Fund. ____________Initials

(23) This Agreement constitutes the entire Agreement among the parties with respect to the subject

matter hereof and may be amended only by a written instrument executed by all of the parties.


This Agreement shall be enforced, governed, and construed in accordance with the laws of the State of

Texas.

Investor Signature Date

_________________________________ ____________________________

Investor Signature Date

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ACCEPTANCE:

The person named above is admitted as a Unit Holder this____ day of__________2010

By:__________________________________

Printed Name__________________________

Authorized Fund Manager

SECURITIES REGISTRATION:

Investor’s Name_____________________________________________

Address____________________________________________________

____________________________________________________

Home Phone_________________

Work Phone_________________

Social Security Number or Tax I.D.__________________________

Employer________________________________________________

Title___________________________________________________

Individual_____

Trust Acct.____

J.T.W.R.O.S.___

T.I.C._________

T.B.E_________

Corporate______

Number of Units subscribed for:___________

Total Dollar Amount $______________________

_________________________ _________________________

Investor’s Signature Investor’s Signature, 2nd

Party

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PLAN OF DISTRIBUTION RECAP

The Preferred Units (“Units”) are being offered only to sophisticated and “accredited investors” as defined

under Regulation D of the Securities Act. The Units will be offered and sold on behalf of the Fund by its

officers and directors on a “best efforts” basis. The Fund may engage broker/dealers that are members of

the FINRA to assist with the Offering. In that event, cash commissions of no more than 5% (five percent)

of the total amount of subscriptions sold will only be paid to such brokers/dealers. The maximum amount

of commission payable by the Fund therefore shall not exceed 5% (five percent). The Fund may agree to

issue to such FINRA broker/dealers Units of the Fund’s Units equal to up to 5% of the Unit sold in this

Offering.

If the Fund engages any FINRA broker/dealers in connection with this Offering, it may indemnify them

against certain civil liabilities, including liabilities arising under the Securities Act that may arise in

connection with this Offering as a result of disclosures for which the Fund is responsible. The FINRA

broker/dealers would pay their own costs and expenses in connection with the Offering in excess of the

selling commissions and expense allowance described above.

There is no firm commitment to purchase any of the Units. The Offering will continue without any

provision for refund unless the Minimum Offering is not subscribed for. All proceeds generated from the

sale of Units will be escrowed until the Minimum Offering is subscribed. See “Use of Proceeds.”

Other than this Memorandum, the exhibits hereto, no other offering literature will be employed in the

offering of the Units.

METHOD OF SUBSCRIPTION

Each person intending to purchase the Units offered hereby, must deliver the following items to the Fund:

1. A check in the amount of at least $40,000 or multiples thereof, bearing in mind that each

investor must purchase 2 (Two) Units as whole. Therefore, upon purchasing more than 2

Unit, persons must add an additional $40,000, made payable to “Scarlet Matador Fund,

LLC”;

2. A completed and signed Purchaser Questionnaire, a copy of which is attached hereto as

Exhibit B; and

3. A completed and signed Subscription Agreement, a copy of which is attached hereto as

Exhibit C, with the number of Units desired indicated thereon.

These items should be delivered to Scarlet Matador Fund, LLC at:

Mr. Brent D Preston

7111 Santa Fe Dr

Lubbock, TX 79407

Upon acceptance of a subscription, confirmation of such acceptance will be sent to the subscriber. The

Fund reserves the right to reject any subscriptions or portions of subscriptions at its own discretion.

Scarlet Matador Fund - PPM

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