Assume a limited partnership calls for the proceeds from operations to be distributed pro rata pari passu
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Question:
Assume a limited partnership calls for the proceeds from operations to be distributed pro rata pari passu to the preferred equity (80%) and sponsors (20%) until the preferred equity partner reaches a return of 8%, after which the proceeds are distributed equally (i.e., 50/50). Further assume the sponsor made an initial investment of -175,000 in year 0; and received distributions of $12,500 in year 1; $12,500 in year 2; $12,500 in year 3; and $137,500 in year 4 when the property was sold. Assuming the preferred equity hurdle of 8% has been met and $300,000 remains to be distributed, what is the expected annualized return (i.e., IRR) to the sponsor?
Related Book For
Intermediate Accounting
ISBN: 978-0324300987
10th Edition
Authors: Loren A Nikolai, D. Bazley and Jefferson P. Jones
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