Partnership / LLC Models

Adds Limited Partnership and LLC analysis capability to planEASe, enabling you to take any property projected with planEASe and easily convert the analysis into a Limited Partnership or LLC forecast with final reports and graphs suitable for investor presentation. In addition to all the capabilities of planEASe itself, these models allow as many Partnership Fees as you want, allow for separate allocation of tax and cash benefits, and handle Working Capital, Preferred Returns and Staged Investments. (Requires planEASe Base)



Video Title: planEASe Partnership / LLC Models Video Title: planEASe Partnership / LLC Models
  • Video Publication_Date: Jan 01, 2009
  • Video Duration: 4:30 minutes


Real Estate Group Investments in the past few decades have evolved largely from the Limited Partnership form to a Limited Liability Company (LLC) form, although the legal and tax environments in many states still favor the Limited Partnership form. Lately, the Tenants - In - Common (TIC) format has arisen to take advantage of the 1031 Exchange provisions of the Income Tax Code. As a consequence, there are several terminologies used to describe Group Investments (and their participants) which, for purposes of financial analysis, are identical. Accordingly, the planEASe Partnership / LLC Models have evolved to use the following terminology which will be used here to represent investments in whichever of these forms is relevant to your situation:

Model

Measure

Group Name

Manager Name

Members Name

RPI

IRR

Partnership

General Partner

Limited Partner (or Limited)

RPM

MIRR

Partnership

General Partner

Limited Partner (or Limited)

RPR

IRR

LLC

Managing Member

Group Member (or Member)

RPF

MIRR

LLC

Managing Member

Group Member (or Member)



If you have purchased the Partnership / LLC Models, you have an additional choice to Convert Assumptions on the File Menu at the Assumption Edit Screen. This option allows you to convert Real Estate Investment Analysis Assumption Sets to Partnership / LLC Models Assumption Sets (and vice-versa). Thus you may begin analysis of a property with the Real Estate Investment Analysis, and easily convert the analysis into the Partnership / LLC format when that becomes appropriate.

Sensitivity and Risk Analysis may be performed on any assumption value, just as with all other model series. General Partners / Managing Members will find this to be most useful in structuring the appropriate cash and tax distribution methodologies for a particular property in consideration of the attractiveness of the rate of return for the Limited Partners / Group Members versus their own return from the project. Sensitivity and Risk Analysis are also extremely appropriate for the financial projections shown to the Limited Partners / Group Members because they get away from the typical "one point" analysis included in private placement memoranda, and thereby mitigate liabilities involved when events don't proceed as planned.

Sensitivity Analyses have also proven their worth as discussion papers in regard to questionable assumptions such as the investor's tax rate and the projected sale price. When produced in investor meetings, these graphs serve the dual purpose of allaying investor concerns and presenting the General Partner / Managing Member as one who has thoroughly investigated and planned the investment from the Limited Partner / Group Member perspective.

There are two General Assumption Pages added to your Assumption Set when you convert to Partnership / LLC analysis: a Partnership / Group Page and a Distribution Page. The assumptions on these pages are described below.

Partnership / Group Page assumptions deal with the funding of the Partnership / LLC. The individual assumptions are:

Distribution Page assumptions deal with the Partnership / LLC methods and formulas for distributing cash and tax liabilities between the Partners / Members. For both ongoing operations and upon sale of the property, Partnership / LLC cash is distributed according to a Stepdown Allocation. Stepdown means that, step-by-step, cash is allocated according to the following rules, until no more cash remains to be allocated. When all cash available has been allocated, any remaining allocations (if any) are not performed. The cash available for allocation is the total cash available (at sale), or the total cash available less the maximum working capital (for ongoing operations). The Stepdown Allocation is:




Stepdown Allocation of Funds Available for Distribution

FIRST:

To pay any interest due to the General Partner / Managing Member on any loans he has made to the Partnership / LLC pursuant to funding shortfalls

SECOND:

To repay the principal amounts of any loans from the General Partner / Managing Member

THIRD:

To pay any arrearage for the Preferred Return to the Limited Partners / Group Members

FOURTH:

To pay the Preferred Return for the period to the Limited Partners / Group Members

FIFTH:

If the property has been sold, to repay the specified percent of the total investment by the Limited Partners / Group Members

SIXTH:

If the property has been sold, to pay the specified fee to the General Partner / Managing Member on sale

SEVENTH:

Any remaining cash is split between the Partners / Members according to the percentage specified (which percentage may be different for on_going operations and final distribution on sale).


(Because every sale in a Unit Sales project represents a sale of Partnership / LLC Assets, the Step-down Allocation of Funds for Unit Sale analyses is slightly different from this table)

The assumptions specifying the numbers in these cash distributions and the allocation of tax liabilities are:

The Basic Analysis Reports for the Limited Partnership / Group (LLC) Investment Analysis consist of five pages, which are:

Adds Limited Partnership and LLC analysis capability to planEASe, enabling you to take any property projected with planEASe and easily convert the analysis into a Limited Partnership or LLC forecast with final reports and graphs suitable for investor presentation. In addition to all the capabilities of planEASe itself, these models allow as many Partnership Fees as you want, allow for separate allocation of tax and cash benefits, and handle Working Capital, Preferred Returns and Staged Investments. (Requires planEASe Base)