Opportunity Zone Fund Partnership Agreement

Ashley: In addition to the 70% test, there is a 50% income test that is also required. And this 50% revenue test has… There are three ways to stick to it. And the first is the number of hours you pay your employees, as 50% of that number of hours are worked within an area. Or that 50% of your pay slip and consultants are done in an area. The third is that you know that all your equipment and your home management team are running in the area. So think in your head as the landscape company that will cut grass outside the area, but then all the equipment comes back to roost in the Opportunity area. And that`s one of the really important things they need to focus on from a compliance point of view, at the level that can make them, as you know, in compliance with the status. These are some of the things they need to keep in mind. CAPITAL DEPOSITS. Private equity funds enter into underwriting contracts with investors that contractually require them to contribute to a certain amount (capital commitment) when the fund requires it (a call for capital). This concept of capitalization is unlikely to cooperate with a qualified opportunity fund, since investors must transfer cash from their unrealized capital gains to a qualified opportunity zone fund within 180 days of the close of the transaction that generated the capital gain. Therefore, neither investors nor the fund have the time or the luxury to summon the capital when a new investment is identified and a portion of the promised capital of investors is required to acquire it.

In addition, the requirement that all money is collected in advance and not in case of need can cause problems for the Qualified Opportunity Areas Fund. As mentioned above, a qualified opportunity fund must manage 90% of its assets in the form of Qualified Opportunity Zone Property. Cash is not included in the definition of qualified opportunity property. Therefore, if a qualified opportunity fund is not able to convert its money into one or more real estate assets in the qualified opportunity area to comply with the 90% rule, it must expect fines. Distributions. Capital distributions made by a private equity fund to its investors are controlled by the appearance of capital events that may include the sale of a holding company, a refinancing or a change in the control transaction. Cash distributions are distributed between limited partnerships/members and the co-manager according to the “distribution waterfall.” The drop in water distribution can be considered as a number of separate accounts that work as follows; Once the first account is fully satisfied, the distribution continues to complete the next account, etc.

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