Thanks for the interesting case and context, Leyla. I find the notion of being an LP in a class C deal almost repulsive. Too many uncertainties about surprise maintenance costs and problems to be encountered in renovations. Something pushing Class B up a notch or two would seem less fraught with unknowns.
This is fascinating. It also raises a follow-up question - they set the "recap" at $15mm. OK. But that reprice was not set by the market but by the sponsor in a closed market where they dictated the pricing (in a way no doubt advantageous for the previous investors and for the GP). So it gets them promoted, plus it gets the previous LPs out (which they may be happy about) and kicks the can down the road. That seems fairly unethical unless it's fully disclosed that that's what they're doing, in which case I'd ask - why would an LP do that deal?
Thanks for the interesting case and context, Leyla. I find the notion of being an LP in a class C deal almost repulsive. Too many uncertainties about surprise maintenance costs and problems to be encountered in renovations. Something pushing Class B up a notch or two would seem less fraught with unknowns.
great insights on all the hidden items
This is fascinating. It also raises a follow-up question - they set the "recap" at $15mm. OK. But that reprice was not set by the market but by the sponsor in a closed market where they dictated the pricing (in a way no doubt advantageous for the previous investors and for the GP). So it gets them promoted, plus it gets the previous LPs out (which they may be happy about) and kicks the can down the road. That seems fairly unethical unless it's fully disclosed that that's what they're doing, in which case I'd ask - why would an LP do that deal?
I also didn't even know this was possible.