OVERVIEW
We propose a partnership structure in which Terabon Real Estate acts as the General Partner. It takes all of the risks and receives back-end profits of 20% upon sale, refinances, or at every 5-year monitoring period.
The following structure is proposed for the General Partner duties and fees:
FUNCTIONS
1. Finds property for acquisition
2. Performs all due diligence
Lease audit
3rd party service agreements
Market analysis
3. Financial analysis
Budgets for 1st five year
IRR analysis by year for 5 years
Cash flow analysis by year
4. Creates a Capital Expenditure budget
Identifies improvement items
Gets pricing and timing
5. Executes contracts and reviews findings of all 3rd party contracts
Seismic
Property Conditions
Environmental
Parking and Zoning
6. Enters into Purchase and Sale Agreement with Seller
7. Evaluates alternative loan structures, applies for and obtains a loan
8. Provides all legal and other support for loan documents
9. Reads and evaluates loan documents
10. Hires property manager and oversees functions
11. Sets up proper bank accounts and takes care of loan and partnership returns
12. Executes business plan, including all capital expenditure improvements
13. Accounting sends out monthly financial reports and quarterly investment checks or wires
FEES
1. Acquisition fee of 2% of purchase price
2. Annual Asset Management fee of .2% of the market value of property
3. Performance Fee of 20% of the profit
4. Refinance fee of 1% of the loan amount
5. Property management fee at market rate
GENERAL PARTNER EQUITY
1. Between 2% to 5% depending on the size of the property and the equity required.
2. Pari Passu earnest money participation
INVESTMENT SCHEDULE
1. $100 million of property purchased Year 1
2. $150 million of property purchased Year 2
3. $300 million of property purchased Year 3