We welcome other qualified investors to invest with us under the terms of what we refer to as our 8x co-investment arrangement. Terms of such a co-investment typically are structured as follows:
Structure: All funds are combined under a single purpose entity (SPE) to be invested en toto in a given investment.
For instance, if the co-investment structure is investing in a 10% stake in XYZ, LLC (typically each SPE will be an LLC), then the SPE would be Speedwell-XYZ, LLC, which entity in its entirety would own said 10% stake.
Management Fees: Speedwell as the managing member, receives a 0% management fee for managing said SPE.
For instance, using the same investment example, assuming that the total investment was $1 million, and the annual cash flow was $100,000, then the asset management fee would be $0.00 and the annual management fee would be $0.00.
Expenses. Including Speedwell, all members of said SPE pay their pro-rata share of direct expenses related to the operation of said SPE including legal, accounting, filing fees, franchise taxes, etc.
Using the previously referenced example, if the total annual expenses totaled $10,000 and Speedwell owned 20% of the SPE, then Speedwell would be responsible for $2,000 and the remaining members would be responsible for the remaining $8,000.
Base Ownership as General Partner. In the event that Speedwell is acting as the General Partner (responsible party) of the entire investment, then Speedwell shall receive a base ownership interest in the SPE equal to 8% of the SPE.
Base Ownership as Limited Partner. In the event that Speedwell is not the responsible party to the entire investment, but is a limited partner, and another entity is acting as the General Partner of the investment, then Speedwell shall receive NO base ownership interest in the SPE, other than that in which it invests under the same terms and conditions as the other investors.
Speedwell Cash Flow Bonus. As a bonus, Speedwell shall receive a bonus of 8% of each year’s cash flow that exceeds an 8% non-cumulative, non-accrual cash distribution (after expenses as detailed above) to the members of the SPE.
In the same example, if the SPE receives a net cash flow of $120,000 on said $1 million investment, then Speedwell shall receive a cash flow bonus of $3,200 (8% of the $40,000 in excess of the 8% return of $80,000).
Speedwell Exit Bonus. At such time as the investment has an exit event (either through a sale or refinance) that meets or exceeds the initial investment, then Speedwell shall receive a bonus of 8% of the amount received in excess of the original investment (which shall be adjusted to the investors’ favor for any years in which the cash flow did not meet the 8% threshold).
Using the same example, in the event that in Year 5, the investment is sold yielding a net distribution to the SPE of $2 million (and assuming that the investors received at least an 8% cash return during each of said 5 years), then Speedwell shall receive a bonus of $80,000 ($1 million profit x 8%).