A Promoted equity product gives sponsors the ability to invest a smaller amount of equity in a particular project, participate in the value created that is above and beyond their pro-rata investment. The product is well suited to sponsors with liquidity, though wish to diversify their holdings with multiple real estate investments.
Promoted Equity
Investment Amount:
$2MM and up
Geography:
Primary and secondary markets
Hold period:
2-10 years
Property Types:
Multifamily, Mobile Home Community, Office, Industrial, Self-Storage, Retail, Hotel
Structure:
A minimum contribution of 10% of total equity position (90/10)
LTV/ LTC:
Up to 98% of appraised value/ cost
Origination fee:
2% and up
Promote:
Sponsor receives a promote on the senior equity, which may result in a 50%/50% split of excess profits, subject to various restrictions, terms and conditions.
Control rights:
Review/approval of certain major decisions required
Rates of Return:
15% and up. Typically priced with a target IRR which is realized through a combination of origination fees, a potential preferred pay rate, and/or a “lookback” payment due upon sale or refinance. No fixed coupon required.