Covered Land Play - GP/Manager promote/performance incentive structure
I'm in contract on a stabilized cash flow deal that has the potential to add 70% additional units to the existing site. The deal is going to be funded by friends and family so I'm trying to conceive a deal structure that allows me to achieve a performance bonus should I achieve my entitlements. The possible exits I see are a) no entitlements achieved so sell at the end of year 5/10 hold period or b) entitlements achieved and sell as entitled deal or c) move to bridge/construction financing and build entitlements.
The issue is how do I value and get paid for scenarios b and c? I was thinking of perhaps an A/B class LLC structure where there's an element of dilution based on the new appraised value but was hoping there was an easier way to skin the cat.
Have you guys encountered a similar situation and if so, how did you structure it? Thanks in advance for any helpful advice.
Hi Doekim, whoops, looks like nobody chimed in here.... maybe one of these discussions below is relevant:
Hope that helps.
Hmm not entirely sure how you aren't being compensated in scenario B or C? In the event you achieve getting your entitlements and go to sell the land, a buyer would value that increased development rights, which will ultimately flow through your waterfall structure (increase return/IRR ). In the event that you build out the site yourself it gets a little trickier given the increased investment horizon. Perhaps use equity multiple instead of an IRR for your hurdles.
Est alias enim et debitis repellat. Deserunt maiores ut earum inventore vero. Est corporis neque aliquam non beatae delectus. Exercitationem voluptates aliquam dicta consequatur adipisci.
Itaque nobis sit neque praesentium reprehenderit laudantium. Animi velit tempora minus iste officia tenetur illo magnam. Incidunt autem nostrum quas accusantium et deleniti odit. Facere eius labore eum mollitia sint nihil.
Vel dolorem commodi autem voluptatem blanditiis. At itaque quidem iusto ea. Eum ea similique at quod laudantium. Ut libero molestias optio quo dolor eaque nobis. Omnis laboriosam aut molestiae dolore tempora. Sit sequi eos in temporibus vel qui.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...