Evaluating Return as a Limited Partner in a Syndication with a long-term hold?

[Brian Freedman]

I'm looking for advice on how to properly measure/understand the return on investment as a Limited Partner in a syndication deal with an indefinite holding period.

I'm considering investing in a Syndication with an indefinite holding period. The sponsor is trying to build a big portfolio of buildings that will provide cash flow to investors, and selling is not part of the strategy. As the Limited Partner (LP) and if the project goes well, I'll get 50% of my capital back in Year 3 and 100% of my capital back in Year 10. Any profit distributions are at a 70/30 promote. In addition, I'll get a 6% preferred return on the capital I have in the deal at the moment the calculation is made. Once all my capital is returned, my equity is reduced by 30% as part of the promote given to the sponsor. Should I view this as a sort of loan whereby I get compensated with a 6% return AND equity? And the risk of getting my loan repaid is the financial health of the building; versus say if I loaned my friend $50k with 6% interest, the risk would be the person? Furthermore, since my basis is zero once all my capital is returned, how do I calculate a return on my equity in the building once that happens? For example, if my equity is $100,000 and I'm only getting $2,000 per year in cash distributions, wouldn't it be better if I could somehow take that $10k out of building? Or is that cash all gravy, so to speak, because my basis is zero. Syndication returns are a lot clearer to me if the building is sold in 5 years, but in the case where it's held, it's confusing to me how to properly measure success.

If the building is held for 30 years, for example, is it fair to ask whether it would've been better to just put that $50k in the SP500?