Compare duel Class A and B LP, vs one class LP on RE Syndication

[Duke Giordano]

Hey Guys,

I have been looking for a detailed calculator or analysis on comparing a single tier LP, vs two-tier Lp returns and cannot seem to find.  I was trying to quantitatively evaluate as more syndications in MF investments are using Class A and B shares how this effects return both in the timing of returns and overall returns.  Specifically I am trying to understand why more syndicators are going to this option and the effect it has on the LP Class B investor.  In addition, how the risk profile for Class B changes.

1. For example, how does a deal compare as the percentage of class A investors increase or changes that is offered in a deal.  Meaning say one deal offers 75% class B and a max 25% class A vs another deals offering a 50% class A/ and 50% class B structure. How does this effect the timing and overall returns for class B by changing the max percentage of class A LP's.

2. In a second scenario, can you compare once again in respect to Class B investors (upside investor), the same deal that offers either the classic one class LP investment class vs the two tiered class A/B LP investor class assuming say a 10% Pref class A (no upside)  7% class B (Upside potential) in the split deal vs straight 8% pref for all LP's in the classic deal.  How does this effect Class B returns and risk profile?

3. As a separate question in relation debt, specifically to bridge and mezzanine debt, can you qualitatively analyze a deal that has say 10% mezzanine debt or bridge debt and how that effects the deal from a LP standpoint? Does it mainly just increase deal risk? For example say the deal financing has 65% LTV, with 10 mezzanine or bridge debt on top for a total 75% LTV.

I am curious for those LP's looking for upside how they view these two-tiered LP deals, and how they analyze.

Thanks

Duke