In addition to the other information contained in this Prospectus, the
following risk factors should be carefully considered in evaluating the Company
and its business before purchasing any of the Units offered hereby.
This Prospectus contains forward-looking statements within the meaning of
the Federal securities laws. Discussions containing such forward-looking
statements may be found in the material set forth under "Prospectus Summary,"
"Use of Proceeds," "Management's Discussion and Analysis of Financial Condition
and Results of Operations," and "Business" as well as within the Prospectus
generally. Actual results could differ materially from those described in the
forward-looking statements as a result of the risks and uncertainties set forth
below and within the Prospectus generally.
DEPENDENCE UPON PRINCIPALS AND OTHER KEY PERSONNEL
The Company's operations will depend heavily upon the efforts of John A.
Burchett, Joyce S. Mizerak, Irma N. Tavares and George J. Ostendorf, each of
whom would be difficult to replace. Mr. Burchett, Ms. Mizerak, Ms. Tavares and
Mr. Ostendorf will sign employment and non-competition agreements with the
Company. See "Management -- Employment Agreements." There can be no assurance,
however, that any of these individuals will remain in the Company's employ. The
loss of any one of these individuals could have a material adverse effect upon
the Company's business and results of operations. See "Management -- Directors
and Executive Officers."
RECENT FORMATION AND LACK OF RELEVANT EXPERIENCE
HCHI is a newly formed entity the earnings of which will depend primarily
upon the Principals' ability to acquire and manage the Investment Portfolio.
Although HCP has managed the short-term trading of Single-Family Mortgage Loans
and HCMC has originated Multifamily Mortgage Loans, none of the Principals has
experience in managing investments in Multifamily Mortgage Loans and Commercial
Mortgage Loans or in managing long-term investments in any Mortgage Loans or
Mortgage Securities. In addition, none of the officers and directors of HCHI has
experience in managing a public company or a REIT. See "Business -- Investment
Portfolio -- Single-Family Mortgage Operations -- Prior Activities of HCP;"
"Management -- Directors and Executive Officers." The Company has not purchased
or committed to purchase any Mortgage Assets and will not hold any Mortgage
Assets before the closing of the Offering. Although HCP has previously rendered
advisory services in connection with securitization transactions, neither it nor
HCMC has securitized any significant amount of Mortgage Loans. There can be no
assurance that the Company will be able to successfully operate its business as
described in this Prospectus. If the Company does not originate and acquire a
sufficient number of Mortgage Loans, or securitize its Mortgage Loans as
planned, the Company's business and results of operations will be materially
Historical financial information presented in this Prospectus and in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" should be regarded solely as background information and may not be
indicative of future results, which may vary substantially and adversely from
BENEFITS TO THE PRINCIPALS
The Principals will realize material benefits in connection with the
consummation of the Formation Transactions. If, prior to the closing of the
Offering, HCP is not able to divest itself of all of its interests in
Alpine/Hanover LLC and ABH-I LLC, and divest itself as asset manager to BT
Realty Resources, Inc., HCP will distribute to the Principals its rights to any
receivables arising between June 30, 1997 and the closing of the Offering from
these investment entities. Those receivables are expected to approximate
$1,000,000. In connection with the consummation of the Formation Transactions
and the closing of the Offering, (i) the Principals will receive, in exchange
for the HCP Preferred, 12.54% of the initially outstanding shares of Common
Stock of HCHI (with a total value of $10,750,005 based on an initial public
offering price of the Common Stock in the Offering of $15.00 per share) and (ii)
subject to lender approval, John A. Burchett will