Venture Capital Limited has formed a private real estate syndication to

acquire and operate the Tower Office Building. Venture will act as the

general partner and will have $35$ individual limited partners. The venture to

be undertaken and relevant cost and financial data are summarized as

follows:

Partnership facts and equity requirements

Organization: December, year $1$

Number of partners: $1$ general partner and $35$ limited partners

Equity capital contribution: General partner, $10\%$; limited partners, $90\%$

Cash assessments: None

Cash distributions from operations: General partner, $10\%$; limited partners,

$90\%$

Taxable income and losses from operations: General partner, $10\%$; limitedVenture Capital Limited has formed a private real estate syndication to acquire and operate the Tower Office Building. Venture will act as the general partner and will have $35$ individual limited partners. The venture to be undertaken and relevant cost and financial data are summarized as follows: Cost breakdown Land $ $1,000,000$ Improvements $9,000,000($capitalized$)$ Points $130,000($amortized over loan term$)$ Subtotal $ $10,130,000$ Organization fee $160,000($amortized over $5$ years$)$ Syndication expenses $100,000($capitalized$)$ Total funding required $ $10,390,000$ Financing Loan amount $ $8,000,000$ Interest rate $5\mathrm{.}95\%$ Term $25$ years $($monthly payments$)$ Points $ $100,000$ Partnership facts and equity requirements Organization: December, year $1$ Number of partners: $1$ general partner and $35$ limited partners Equity capital contribution: General partner, $10\%$; limited partners, $90\%$ Cash assessments: None Cash distributions from operations: General partner, $10\%$; limited partners, $90\%$ Taxable income and losses from operations: General partner, $10\%$; limited partners, $90\%$ Allocation of gain or loss from sale: General partner, $15\%$; limited partners, $85\%$ Cash distribution at sale: Based on capital account balances Operating and tax projections Potential gross income $($year $2)$ $$1,540,000$ Vacancy and collection loss $10\%$ of potential gross income Operating expenses $($year $2)35\%$ of effective gross income Depreciation method Straight$-$line, $39$ years Projected growth in income $2\%$ per year Projected resale price after $5$ years $$12,930,000$ Ordinary income tax rate $24\%$ Capital gain tax rate $15\%$ Selling expenses $5\%$ Required: a$.$ Determine an estimated return $($ATIRRe$)$ for a limited partner. $($Hint: Consider all $35$ limited partners as a single investor and the depreciation recapture tax to be the lesser of the ordinary income tax rate or the $25\%$ maximum recapture tax rate.$)$ b$.$ Determine an estimated return $($ATIRRe$)$ for the general partner.