The language below is taken directly from a partnership agreement for a hotel project.

Members are the members of a limited liability company formed to invest in this hotel.

Manager is the person who put this deal together.This section deals with how they will make

distributions of cash to the parties who are in this investment.

6.05(a) says that they will first get back their investment. This includes the manager because he

is also an investor. So, for example, if the initial investments were $12 Million by investors and

$500,000 by the manager, they will first get back these original investments.

6.05(b) says that they each get a designated priority return. For example, this might be a

cumulative 6% return on their investment. So for each year the project is in existence, and using

my investments from the preceding paragraph, the investors get $720,000 and the manager gets

$30,000 (6% of the investment).

6.05(c) says that after everyone has their investment back, and the 6% base return, then the cash

is distributed 65% to members, which would be all investors, and 35% to the manager. This

continues until investors have an IRR of 16% on the investment.

6.05(d) says that after the investors have a 16% IRR any additional cash goes 50% to investors

and 50% to the manager.

So notice that the manager, who put the deal together, selected the site, designed the hotel

and oversaw construction, and manages the property, gets an increasing share of cash as

the deal generates a higher IRR. EXPLAIN WHY THIS WOULD BE DONE WHY

WOULD INVESTORS GO FOR THIS??