Analyzing Syndication Deal - Return on Capital?

[Danny L.]

Hello all,

I'm currently looking at a potential MF syndication deal. I started investing in syndication this year and have been learning through books, online, and various podcasts. One of the things I came across was determining if the deal was based on Return on Capital or Return of Capital.

Looking at the PPM for this deal, I couldn't figure out which method they were using. I searched the document for either phrase and came up with nothing.

The closest section I've found is this:

(i) Net Distributable Cash shall be distributed quarterly on the following basis:
a. First, to Class A Members, a 9% Preferred Return,
b. Second, pari passu to Class B Members, a 7% Preferred Return, to Class C Members, an 8% Preferred
Return, to Class D Members, a 9% Preferred Return, and to Class E Members, a 10% Preferred Return,
in each case in proportion to each Member’s respective Preferred Return Balances until each such
Member’s Preferred Return Balance is reduced to zero;

My guess is "until each such Member’s Preferred Return Balance is reduced to zero" would indicate distributions are based on Return of Capital.

I'll appreciate if someone with experience on this topic can confirm if my interpretation is correct.

Thank you.