Syndication questions

[Adam Scherr]

Hello All,

I have been reading a lot of the info here trying to get a good understanding of how to structure my first syndication. From reading, I do understand that there is no 'one size fits all' for structuring syndications. For my questions, I am looking for feedback as to what is typical or not, etc.

Any help is appreciated!

1) If the GP is investing a portion of the equity, would they be part of the LP or would the model include a place for GP investment? If separate from LP equity, where would the return typically fall on the waterfall and would the GP receive a preferred return on that equity assuming that the LP are getting one?

2) Is it common, especially on smaller deals and smaller groups, to pay back all investor principal at reversion vs paying back as the 1st level of the waterfall?

3) Is there always a preferred return or is it also common for 100% of cash flow be an equity split?

4) Do LP's typically receive a preferred return on sales proceeds or only on operational cash flow?

5) What if the project is some type of value-added project that doesn't generate cash-flow in early period(s), does the preferred return accumulate until there is enough cash-flow to pay all preferred returns?

Again, thank you in advance for any assistance you can provide.

Thanks,
Adam

[Jonathan G.]

1) GP will get class A for his equity contributions with all applicable terms as all other LPs. GP will also get class B for management and syndicating the deal.
2) We give our limited partners a regular preference in liquidation (i.e. LPs get their original investment back first).
3) This is on a case by case basis. I believe your LPs will normally require a preference over class B holders.
4) Can be either. We are giving preference on capital gain only. They can negotiate getting a preferred return on spendable income…..
5) Again, this is on a case by case basis, it’s all a matter of negotiation with your partners.