Hi guys,
If I’m running a REPE with LPs and GP (myself/partner), how would I go about refinancing a property 3-4 years after acquisition? With the refi proceeds, would I return capital to LPs and myself(sponsors), or pay pref return? Thanks in advance.
Pref always gets paid down first.
How many years of pref? If refi happens in year 4, then all the accumulated pref until year 4 minus already paid = total pref unpaid till year 4. Do I pay this? Once this is paid, what do I do then? Thanks!
What do you PPM docs or JV docs say? That’s what you should follow. If you don’t have these docs, create them. In the docs, you’ll outline how all this works. Hire an attorney.
This should be outlined in your legal docs as pudding said. Pref being paid first is the typical structure if a preferred return is paid, and then any excess would go towards a return of capital. Only after capital is 100% returned would you start taking a promote.
Again, this is the typical structure but its dependent on what was agreed upon.
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