Real Estate Preferred Equity Term Sheet

I. Overview

The following Term Sheet outlines the principal terms and conditions for the proposed preferred equity investment in a commercial real estate project by [Your Name] ("Investor") into [Property Owner LLC] ("Sponsor"). This summary serves as a basis for negotiation and must be finalized in the binding Investment Agreement.

This Term Sheet reflects the preliminary agreement concerning the preferred equity investment in [Property Description] ("Property"). The Property offers promising growth opportunities and aligns with the long-term strategic interests of [Your Name].

II. Investment Details

The following details outline the investment terms, conditions, and anticipated returns:

• Total Investment Amount: [$ Amount]

• Preferred Return Rate: [% Rate] per annum

• Projected Hold Period: [X] years

• Equity Structure: The preferred equity investment will be structured as non-participating preferred equity. This means that [Your Name] will receive a fixed preferred return on their investment, but will not participate in any additional profits beyond this return. The preferred equity will be convertible into common equity under certain conditions as outlined in the Investment Agreement.

• Exit Strategy: The anticipated exit strategy for this investment is a sale of the Property. The sale is expected to occur at the end of the projected hold period, providing a return on investment for [Your Name]. Alternatively, if market conditions are favorable, a refinance option may be considered to capture any potential appreciation in the Property's value while maintaining ownership.

Investor contributions will be made in accordance with a disbursement schedule that aligns with the development milestones of the Property. The investment is secured by a proportional equity stake in the Property with priority over common equity but subordinated to any senior debt.

III. Roles and Responsibilities

[Your Name] and [Sponsor Name] will have distinct roles and responsibilities throughout the term of the investment. Details include but are not limited to:

• Capital Contributions: [Your Name] is responsible for providing the capital investment detailed in Section II.

• Operational Management: [Sponsor Name] will handle all aspects of day-to-day property management and operations.

• Reporting Requirements: [Sponsor Name] will provide quarterly financial and operational reports to [Your Name].

• Decision-Making: Major decisions require mutual consent except as explicitly delegated through this agreement.

Both parties intend to collaborate extensively to ensure the successful execution of the project’s objectives and the maximization of ROI.

IV. Conditions Precedent

Finalizing the investment is contingent upon fulfilling certain conditions precedent, which include, but are not limited to:

• Diligence Review: Completion of a comprehensive due diligence process by [Your Name].

• Legal and Regulatory Approvals: Obtaining all necessary approvals from relevant legal and regulatory bodies.

• Agreement on Final Terms: Final approval and execution of the Investment Agreement by both parties.

The terms set forth in this Term Sheet are intended to proceed to a definitive agreement that mirrors the conditions described herein unless revised by mutual consent of both Investor and Sponsor.

V. Confidentiality

All negotiations and agreements detailed in this Term Sheet must be conducted under strict confidentiality. Both parties agree not to disclose information regarding this Term Sheet and its contents to any third party without prior written consent from both Investor and Sponsor, except as required by law or for obtaining approvals necessary for the execution of the investment.

This confidentiality clause will serve to protect the details of the investment and strategies discussed, ensuring exclusive negotiation and preventing conflicts of interest.

VI. Expiry and Termination

This Term Sheet is valid until [Expiration Date]. If not executed into a definitive agreement by this date, the terms proposed herein will be reviewed and may be subject to modifications or nullification at the discretion of either party.

Either party may terminate the agreement with written notice if key terms or conditions are not met within the specified timelines.

Agreed to by:

[Your Name] (Investor)

[Date Signed]

[Sponsor Name] (Sponsor)

[Date Signed]

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