REFI EQUITY RESTRUCTURE

[Jordan Santiago]

Hey BP,

I heard an interesting conversation about equity restructure once the property is stabilized and refinanced. Not something I would personally lean towards, but just want to hear other opinions and feedback.

This individual owns a little over 1,000 units and once he refinances and returns back most or all of his investors capital, the equity structure changes from 80/20 to 70/30, and sometimes even 60/40. Or, he will keep the equity 80/20 but change something within the distribution of cashflow. 

Now obviously, that is beneficial to sponsor, and less risky now for the investor being that their capital was returned back so I see how that is fine and not too horrendous, but seems to me that could damage investor returns or maybe that sponsor may lose out to a competing sponsor that doesnt restructure the terms

Just curious and would love to get opinions and a conversation started, what are your thoughts and have you or anyone you know done that?

Thanks!