Real Estate Private Equity - distribution boost

Hi All,

I am currently looking at a PE deal for multi family to see how it had been performing. With limited access to information, I only have initial capital contribution of GP and LPs (2% and 98% respectively) and actual cash distributed to each partner for 6 periods. And I found an interesting trend. Despite of GP's sharing ratio of 2%, it received 7% and 6% of total operating income in 2nd quarters for 2 years.

I have a distribution history for 2013 and 2014, and it shows that it received 2% every quarter only except for the 2nd quarters of the two years. Could this be associated with any tax benefit? I thought about tax refund from nol carry over (cannot confirm since I don't have information about prior to those periods). Could that be it? Would there be any other possibility? Could it be any form of promote/catch up/incentive even though the property was not sold yet? I really appreciate for your insight in advance!

Comments (2)

Nov 7, 2016

Definitely going to need more info here man. Do you know what the basic structure of the waterfall agreement is? If the GP put up 2% of the needed capital for a deal, it's very unlikely that they're getting 2% of the free cash from the get-go. When was the deal done? Has it been performing well?

Nov 8, 2016