For the avoidance of doubt, the calculation of Total Return will (i) include any appreciation or depreciation in the NAV of shares issued during the then-current calendar year but (ii) exclude the proceeds from the initial issuance of such shares.
“Hurdle Amount” for any period during a calendar year means the amount that results in a 5% annualized internal rate of return on the NAV of the shares outstanding at the beginning of the then-current calendar year and all shares issued since the beginning of the then-current calendar year, taking into account the timing and amount of all distributions accrued or paid (without duplication) on all such shares and all issuances of shares over the period and calculated in accordance with recognized industry practices. The ending NAV of the shares used in calculating the internal rate of return will be calculated before giving effect to any allocation/accrual to the performance fee and any applicable stockholder servicing fee expenses. For the avoidance of doubt, the calculation of the Hurdle Amount for any period will exclude any shares repurchased during such period, which shares will be subject to the performance fee upon repurchase as described below. Except as described in Loss Carryforward below, any amount by which Total Return falls below the Hurdle Amount will not be carried forward to subsequent periods.
“Loss Carryforward Amount” shall initially equal zero and shall cumulatively increase by the absolute value of any negative annual Total Return and decrease by any positive annual Total Return, provided that the Loss Carryforward Amount shall at no time be less than zero and provided further that the calculation of the Loss Carryforward Amount will exclude the Total Return related to any shares repurchased during such year, which shares will be subject to the performance fee upon repurchase as described below. The effect of the Loss Carryforward Amount is that the recoupment of past annual Total Return losses will offset the positive annual Total Return for purposes of the calculation of the Adviser’s performance fee. This is referred to as a “High Water Mark.”
The Adviser will also receive a performance fee with respect to all shares that are repurchased at the end of any month (in connection with our share repurchase plan) in an amount calculated as described above with the relevant period being the portion of the year for which such shares were outstanding, and proceeds for any such share repurchase will be reduced by the amount of any such performance fee.
During the fiscal year ended December 31, 2020, the Adviser earned a performance fee of $2,215,134. During the fiscal year ended December 31, 2019, the Adviser earned a performance fee of $200,649.
Expense Reimbursement. We will reimburse the Adviser for out-of-pocket costs and expenses it incurs in connection with the services it provides to us, including, but not limited to, (1) legal, accounting and printing fees and other expenses attributable to our organization, preparation of the registration statement, registration and qualification of our common stock for sale with the SEC and in the various states and filing fees incurred by the Adviser, (2) the actual cost of goods and services used by us and obtained from third parties, including fees paid to administrators, consultants, attorneys, technology providers and other service providers, and brokerage fees paid in connection with the purchase and sale of investments and securities, (3) expenses of managing and operating our properties, whether payable to an affiliate or a non-affiliated person, and (4) out-of-pocket expenses in connection with the acquisition, origination, financing and development of properties and real estate-related investments, whether or not such investments are acquired. Such out-of-pocket costs and expenses will include expenses relating to compliance-related matters and regulatory filings relating to our activities (including, without limitation, expenses relating to the preparation and filing of Form PF, Form ADV, reports to be filed with the CFTC, reports, disclosures, and/or other regulatory filings of the Adviser and its affiliates relating to our activities (including our pro rata share of the costs of the Adviser and its affiliates of regulatory expenses that relate to us and other Real Estate Accounts)). We will not reimburse the Adviser for expenses related to personnel of the Adviser who provide investment advisory or administrative services to us, subject to certain exceptions set forth in the Advisory Agreement.
As used herein, “Real Estate Accounts” means investment funds, accounts, vehicles, products and/or other similar arrangements sponsored, advised, and/or managed by Oaktree or its affiliates, whether currently in existence or subsequently established (in each case, including any related successor funds, alternative investment vehicles, over-flow funds and co-investment vehicles) which are organized to invest in, among other assets, (i) real estate, real estate-related debt and corporate securities, distressed mortgages and properties and other real