5/21/2023 0 Comments Trion real estate management![]() ![]() Similarly, 37 th Parallel’s Fund II is anticipated to operate for 6 to 8 years.īoth funds are structured as LLCs in which investors have fractional ownership. Trion’s Fund IV is a closed-end fund expected to be complete in approximately 7 to 8 years. ![]() While many of our current clients invest in either Class A or Class B, a significant portion allocates a ratio of their Fund II investment across both A and B Shares.” Investors can shape their investment based on their investment goals. In essence, the portion of the investors’ commitment that’s in Class B shares will receive lower current income later in the fund life (although they are still expected to receive income during the fund life), in return they get a higher than normal equity growth and total return potential with all the same tax benefits. That said, the Class A investor will still get pro-rata flowthrough depreciation, which can help materially defer any taxable income.Ĭlass B (Total Return) Shares have a 7% annual preferred return, second access to distributable Fund II cash flows, with full equity growth participation from the portfolio of multifamily assets in the fund at asset/portfolio sale or recapitalization. In essence, the portion of the investor’s commitment that’s in Class A shares will receive more income sooner from the fund but will not participate over a 9% annual preferred return. Below is just a summary of a few of the relevant terms.Ĭlass A (Current Income) Shares have a 9% annual preferred return, first access to distributable Fund II cash flows, with capped upside. Note, please review the 37P – Fund II Private Placement Memorandum (PPM) for specific details. This is why we launched Fund II with two share classes – Class A and Class B. So, it made sense to provide the ability to more specifically customize the types or return an investor would want. “One of the major benefits of income-producing commercial real estate (especially multifamily) is that you can shape your returns between income, equity growth, tax advantages, time-horizon, etc. Why offer two share classes with different targeted returns? As explained by Dennis Bethel, MD, Principal, Investor Education with 37 th Parallel: They also offer Class A shares targeting 9% returns. Trion’s Fund IV projects annual after-fee returns of 12% to 15% to investors.ģ7 th Parallel’s Fund II Class B shares are targeting a 14% to 17% annual return after fees. Additional information came from the PPM (Private Placement Memorandum) that’s available upon request and from the helpful representatives from Trion and 37 th Parallel. Some of the information below was found directly on the companies’ websites. Let’s learn more about Trion Properties Multifamily Investment Fund (Trion Fund IV) and 37 th Parallel’s Fund II. The funds have a similar structure, although 37 th Parallel offers two share classes to allow investors to prioritize either cash flow or appreciation potential. Each offers a single fund at a time with the option to invest separately in individual projects if you wish. In reviewing the information below, you’ll find more similarities than differences with both the companies we’re examining and the funds they’re putting together.īoth Trion and 37th Parallel have been in business since shortly before the Great Recession. Physician on FIRE has a referral relationship with and/or accepts flat fee advertising payments from several of the companies mentioned above and this site may benefit if you choose to work with them. The goal of the post is not to declare a winner but to look objectively at what they offer while comparing and contrasting two rather similar funds. Below, I’ll provide an overview of two such funds from Trion Properties and 37 th Parallel Properties. Some depreciation is passed through to the investor, some distributions are reported as a return of capital, and REIT dividends can qualify for a 20% deduction via Section 199A, so there certainly are some tax benefits that accompany the REIT structure.ĭirect ownership tends to offer the largest tax breaks, and ownership in an LLC that owns real estate projects is the next best thing. The eREITs are well-diversified with investments in dozens of projects, but they don’t necessarily offer the highest tax efficiency. While selecting individual projects gives you more control and a sense of connectedness to the project, connectedness does nothing for your returns, and you have to select quite a few projects to be well diversified. Later, I invested in funds from DLP and Origin Investments. I invested in syndicated value-add equity deals from Crowdstreet and Republic Real Estate. I started with eREITs via platforms like Fundrise and RealtyMogul. ![]()
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