OKLAHOMA CITY – At the Humphreys Real Estate Income Fund (HREIF) Annual Meeting last month, investors approved an amendment to the Operating Agreement, introduced by the fund’s manager, Humphreys Capital. Designed to enhance alignment, transparency, and operational efficiency, the amendment takes effect on December 31, 2022, and reflects a strategic evolution of HREIF’s structure to better serve its investors.

A primary focus of the amendment was to simplify the fund’s management and fee structure while preserving investor-manager alignment. The revised framework establishes a 75/25 income-sharing model, where investors receive 75% of fund-generated income, assuming a 6% total return hurdle. The manager’s compensation is performance-based, ensuring that distributions align with investor returns, and is subject to a 6% hurdle rate. Additionally, the previous management fee was replaced with a 0.65% advisory fee based on Series One NAV, simplifying compensation calculations and reducing investor confusion.

Beyond financial structuring, the amendment also increased redemption capacity, introduced a formalized quorum for voting, and created restricted Series One Units as part of a director incentive plan. The fund’s governance structure was further refined by codifying the valuation process and shifting to a more formulaic approach to unit pricing, ensuring greater consistency in NAV calculations.

A significant procedural change accompanying the amendment was the fund’s redomestication in Delaware. This move aligns HREIF with widely accepted legal and regulatory standards, providing a more flexible and investor-friendly jurisdiction for governance.

Overall, the restated Operating Agreement modernizes the fund’s structure, reduces complexity, and enhances transparency, ensuring that HREIF remains well-positioned to deliver strong, income-focused returns for investors.