Offering Memorandum Real Estate Limited Partnership - What Is
It?
Auguest 6, 2004
By Richard Smith, LLB
As you may be aware, a partnership is a
collective of people who come together in order to invest
in a product or particular investment. In some cases
the partnership structure may be for the purpose of
protecting a family's assets, in which we commonly call
the structure a family partnership.
In other cases the partnership is created
in order to invest in real estate, in which case we
call the relationship a real estate partnership.
However, unlike other partnership relationships, in
order to be of maximum financial benefit to the partnership a real
estate partnership need to invest in real estate in excess of $10
million. As you might imagine, this is a great deal of money - which
not everyone may have. One method of curing this problem is by means
of an offering memorandum real estate limited partnership.
Offering memorandum real estate limited partnerships are offering
circulars wherein certain founders of the real estate limited partnership
setout the benefits of investing in units of the partnership which
they then circulate among potential investors in the hope that the
potential investor will purchase units in the real estate limited
partnership.
Offering Memorandum Real Estate Limited Partnership - The Benefits
The benefit of having an offering memorandum for units in the real
estate limited partnership is that it provides potential investor
with a very clear explanation of what the partnership's business
plan is. It also allows the investor to limit their liability to
the cost of a unit in the partnership - as they'll be treated as
limited partners in the real estate partnership, not general partners.
Finally, an offering memorandum is the founding document for the
partnership agreement.
Offering memorandum for real estate limited partnerships are generally
a good method for investors to determine whether or not it is a
good idea to invest in a particular real estate project or partnership.
Care has to be taken with the drafting of the offering memorandum
to ensure that the offering memorandum complies with any local securities
and offering regulations.
It is also important to ensure that investors are purchasing units
in the real estate limited partnership, not in a real estate investment
trust - as the tax applicable to the latter may not be the same
as the former. Consequently, it is always prudent to ensure that
you have a lawyer help you draft your offering memorandum if you
intend to offer unit in the partnership to general investors.
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