Use the information in the following questions to determine the cash flow distributions to partners using a parri passu distribution with a promote.

You are putting together a deal to fund the acquisition of a medium-sized multi-family property in Morristown, NJ and require another $850,000 in financial capital to close the deal. You set up a partnership agreement in the form of a parri passu distribution with a promote where you provide 5% of the required equity and your limited partners provide the rest. Cash flows are distributed on a parri passu basis until reaching a 10% return. Any cash flow remaining after reaching this goal is distributed on an 80/20 promote. What is your contribution to the required equity as the sponsor of the deal?

What is the distribution that you, the sponsor, receives from the retirement of the capital account?

What is the cash flow that you, the sponsor, receive due to the promote?

Given the cash flow after debt service below, use the capital account below to determine the equity balance remaining after receiving distributions in the first two years. Cash flow after debt service 0 1 2 3 CF from operations 35,000 90,000 120,000 CF from sale 975,000 Total (850,000) 35,000 90,000 1,095,000 Capital account 1 2 3 Balance pre-distribution 850,000 Balance prior to distribution in 3 Required distribution Actual distribution 35,000 90,000 Balance post-distribution 0