[quote=flu]Interesting. It probably isn’t my cup of tea, but sounds like it’s working for you well and that’s great.
Dumb question. So does your investment in the hotel mean you own a room in that hotel (the condo-hotel model) or is it some other arrangement. Just like to hear about different things.[/quote]
Well it’s been ok so far. The true test is when the properties are sold to see how much/little capital gain/loss you’ll get.
No, I’m an equity share partner in the hotel (It’s a Hilton hotel in FL). I get quarterly dividends from the profit.
Here’s an example of the distribution structure – pretty typical from what I’ve seen with various % and levels.
Distributable proceeds from operating cash flow are to be distributed in order as follows:
1. Senior debt service payments;
2. Then, to all deal-level investors (including the Company) pro-rata and pari-passu until investors have earned an 8.0% annual cumulative preferred return (compounded monthly);
3. Thereafter, 30.0% to the Sponsor and 70.0% to deal-level investors.
Distributable proceeds from capital events are to be distributed in order as follows:
1. Paydown of senior loan and any associated prepayment costs;
2. Then, to all deal-level investors pro-rata and pari-passu until investors have earned an 8.0% annual cumulative preferred return (compounded monthly);
3. Then, 30.0% to the Sponsor and 70.0% to deal-level investors until investors have earned a 20% annual internal rate of return (compounded monthly);
4. Thereafter, 40% to the Sponsor and 60% to deal-level investors.
