CoC and equity shares in MF syndication
I have an opportunity to invest in my first MF as a passive investor. The sponsors are putting 10% down for a 25% equity share. That means that the other 90% down only gets a 75% equity stake in the deal... basically your dollar has less equity power than the sponsors. Here's where I get lost: the COC return as a percentage would no longer be the same for the sponsor and investor, right? For the sponsors, it took less money to earn the equity share, thus a higher COC.... and the opposite is true for the investor. The offering I was given shows the projected COC return for investors, but not sure if it's been corrected for this.
Hoping I framed my question well enough and someone can clarify. Thanks, BP!
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Your observations are corrrct but are merely reflective of how a syndication deal is set up. The sponsor commands an equity stake, say 20-30% for putting the deal together and running the process. That’s how it’s set up. Their “invested $” is actually a positive sign for you in that they are putting some skin in the game.