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Intermediate1 hour11 terms

Real Estate Syndication Key Terms

This curated collection offers key terms that might be helpful when exploring real estate syndication deals. It's designed as a quick reference to clarify commonly referenced concepts and terminology you may encounter in these investment structures. Focus on understanding the language, not comprehensive mastery.

Term Collection

1

Private Placement Memorandum

A Private Placement Memorandum (PPM) is a legal document provided to prospective investors in a private securities offering, detailing the investment opportunity, management, terms, and all associated risks to ensure compliance with securities laws and facilitate informed decision-making.

2

Internal Rate of Return

The Internal Rate of Return (IRR) is a sophisticated financial metric used in capital budgeting to estimate the profitability of potential investments, representing the discount rate at which the net present value (NPV) of all cash flows from a particular project equals zero.

Advanced15-18 min

3

Limited Partnership

A business entity composed of at least one general partner (GP) who manages the business and assumes unlimited liability, and at least one limited partner (LP) who contributes capital but has limited liability and no management authority.

Intermediate14-18 min

4

Accredited Investor

An Accredited Investor is an individual or entity meeting specific SEC-defined financial thresholds or professional qualifications, enabling them to invest in private, unregistered securities and exclusive opportunities.

Intermediate14-15 min

5

Regulation D

Regulation D provides exemptions from SEC registration for private offerings, enabling companies, including real estate syndicators, to raise capital from accredited and sophisticated investors under specific rules.

Advanced12-13 min

6

General Partner

A General Partner (GP) is the active manager in a real estate limited partnership or syndication, responsible for all operational and strategic decisions, and traditionally bearing unlimited personal liability for the partnership's obligations.

Intermediate12-15 min

7

Preferred Return

Preferred Return is a priority distribution threshold in real estate syndications, ensuring limited partners receive a specified annual return on their unreturned capital before general partners share in profits.

Intermediate12-15 min

8

Equity Multiple

The Equity Multiple is a performance metric that measures the total cash distributions received from an investment relative to the total equity invested, indicating how many times an investor's initial capital has been returned.

Intermediate13-16 min

9

Real Estate Syndication

Real estate syndication is a private equity strategy where multiple investors pool capital to acquire and manage large-scale real estate assets, typically led by a sponsor (General Partner) for passive Limited Partners.

Advanced14-15 min

10

Cash-on-Cash Return

Cash-on-Cash Return (CoC) is a real estate investment metric that calculates the annual pre-tax cash flow generated by a property as a percentage of the total cash an investor has invested.

Intermediate15-18 min

11

Sponsor

A real estate Sponsor is the active manager of a real estate investment, typically a syndication, responsible for identifying, acquiring, managing, and exiting the property, while also raising capital from passive investors.

Intermediate12-15 min

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