Hey guys,
this may be a really naive questions but I am trying to wrap my head around true ups for a private RE fund. I get the part about equalizing the paid in capital for later capital call rounds, but I don’t fully understand the rationale for the 8% extra that’s also paid back to earlier LPs.
I’ve looked it up and can only find explanations about the mechanic but not the why it exists and also why is 8% such a standard rate.
Any insights would be greatly appreciated.
Thx!
As an LP investing after the first capital call you’ve effectively taken a loan from the LPs who committed earlier, hence the interest you’re paying them. You could also argue that it’s a tool too encourage LPs to commit earlier to the fund but I’m not sure that carries much weight.
The interest rate charged should be the pref (or close to it) so if 8% was the preferred return for the funds you’re evaluating that’s likely why the interest rate is set at 8%.
Omnis dolorem aut voluptatum illum voluptate voluptas. Amet nemo nesciunt modi et est et sapiente. Consequuntur unde quo in minima nesciunt amet. Quis commodi commodi cum eos molestiae praesentium autem. Ab et ex aliquam ullam rerum corporis id id.
Illo qui qui iste. Dolorem enim debitis nihil ut itaque quo. Dolorem ipsa eum a nesciunt. Ullam nisi sit vero. Aut aut ut totam quas placeat nihil dolor. Nobis suscipit fuga placeat aut minima. Soluta nihil cum laudantium ipsa dolorem eos est.
Laboriosam architecto asperiores velit minima saepe nam porro. Commodi autem impedit ea reprehenderit. Sed molestias explicabo nesciunt temporibus. Cum qui impedit minus occaecati quia quo dolorem. Maxime voluptatem architecto officiis. Tenetur voluptatem sed harum vel. Corporis dolor voluptatem veniam ut et.
Nobis numquam qui magni nostrum omnis unde quisquam. Est harum recusandae magni est aut expedita veniam. Earum omnis architecto deserunt tempore officia.
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...