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Clauses Relating to Preferred Returns

Clauses Relating to Preferred Returns

Name: Clauses Relating to Preferred Returns
Brand: US Legal Forms
Price: 59.00 USD
Rating: 4.85 (407 reviews)

Category:

Partnerships - Drafting Joint Venture Agreements

State:

Multi-State

Control #:

US-P0606-2BAM

Format:

Instant download

Description

This sample form, containing Clauses Relating to Preferred Returns document, is usable for corporate/business matters. The language is easily adaptable to fit your circumstances. You must confirm compliance with applicable law in your state. Available in Word format.

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FAQ

A preferred returnsimply called prefdescribes the claim on profits given to preferred investors in a project. The preferred investors will be the first to receive returns up to a certain percentage, generally 8 to 10 percent.

To calculate the preferred return amount, multiply the total equity investment from limited partners by the preferred return percentage. If the preferred return is 8% and limited partners invested $1 million, the annual preferred return is $80,000 (0.08 $1,000,000).

A distribution of profits to a class of preferred equity Investors that is made before distributions are made to common equity Investors. Preferred returns can relate to the return of invested capital and/or a percentage-based annual rate paid by the Issuer on the invested capital.

Preferred equity is a special financing structure that is common among large commercial real estate investments or private equity funds which can provide participating investors with additional security on their investment while providing the active investors leverage to more capital for an investment.

Economic accruals of preferred return are guaranteed payments as of the time of accrual.

Preferred return indicates a contractual entitlement to distributions of profit. The priority of this distribution is maintained until a predetermined threshold rate of return has been met. Once met, profit distributions are made to any other subordinate stakeholders in the project.

Compounded means that the calculation of a preferred return periodic growth amount comes from the amount of invested capital plus all previously earned but unpaid amounts.

If the preferred return is cumulative it means that the investor will receive the first X% (the preferred return) for that year as well as a make-up for prior years' shortfalls (the preferred return minus the actual return).

Clauses Relating to Preferred Returns

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What is preferred rate of return?

How do you calculate accrued preferred return?

What is a preferred distribution?

What is preferred equity in real estate?

Is a preferred return a guaranteed payment?

How do you calculate preferred return in private equity?

What are preferred returns?

Is preferred return compounded?

What is a cumulative preferred return?

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