How does a PE deal structure vary from a QOF structure?

Answers

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  Matt Campbell

  Hall Estill

  May 01, 2020

  A PE isn't used to having a 2 tier structure in their deals and needs to get acclimated to that. Their cash be cash flow mismatches from the QOZB level and QOF (with the carried interest being applied normally at the QOF level). I would not advise having a carried interest at both the QOF and QOZB level. Basis considerations are important and advised to get nonrecourse financing for deals so investors can take a basis and be eligible for a cash-out refi after two years. This is an underutilized sell-side feature that I can assist clients with.

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  Brad Cohen

  Jeffer Mangels Butler & Mitchell

  May 01, 2020

  Longer timeframe to monetize.

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  Matthew Rappaport

  Falcon Rappaport & Berkman

  May 01, 2020

  The carried interest is ineligible for QOZ tax benefits, so model accordingly. The capital stack can be arranged any way you like, though, with no impact on QOZ tax benefits for the LPs.

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