experience with syndication PPM changed by sponsor

[Jeff Chen]

I would love to get feedback from the community about the practice of sponsors dramatically changing PPM to the disadvantage of LP investors and your experience. In one land development and multifamily construction and leasing project, early investors were promised 10% PR raising money to purchase land and get to pre-construction stage. After that additional class of equity (8% PR) will be raised and construction loan obtained. Early investors were promised to continue to receive 10% PR plus the 8% PR. To get the construction loan and second equity raised the sponsor wants to eliminate the future 10% PR (after construction loan close) and only offers investors to cash out (capital plus accumulated 10% PR without participation of the equity increase since start of the project (no appraisal done).