By Joshua Burd
Eastern Union Funding has launched a new service aimed at helping limited partners increase their return from a real estate investment — without taking on additional risk.
In the process, their general partners will have an opportunity to bring in additional equity.
Known as LP Servicing, the service allows limited partners to syndicate their investment to their network of accredited friends and family, according to Eastern Union. The limited partner not only has the ability to deliver more equity to a deal as a result, but the opportunity to earn carried interest or a so-called promote from its network of investors.
The Howell-based firm provides management and compliance services for the syndication for an administrative fee, largely through the existing staff of its equity servicing division and a network of lawyers. That fee is split proportionately among the limited partner’s investors, allowing that partner to achieve a higher rate of return for the same investment.
The service line also provides those friends and family with access to deals that may have otherwise been out of reach due to minimum investment thresholds, Eastern Union said.
General partners, meantime, are able to raise more equity in a shorter timeframe.
“The service is a win-win-win for each party involved,” said Ira Zlotowitz, president of Eastern Union. “It also minimizes the difficulty and discomfort that can arise when doing business with friends and family.”
LP Servicing oversees the syndication by providing detailed information and explanations about all legal issues, helping determine when to seek counsel and offering other services related to compliance. Eastern Union said it also assists in establishing legal documents and regulatory filings.
When the accredited investors receive their principal back under the LP Servicing platform, the firm will reduce the annual fee and the accredited investors then promote the limited partner 20 percent of their profits.