Ratel Investments
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Investment Process

Ratel offers our real estate operating partners a streamlined commitment and funding process. We believe that “maybes” and inconclusive decision making are inconsistent with the compressed timelines associated with most new investments. While each investment has a unique evolution, Ratel’s typical investment process is as follows:

Introduction

Ratel believes that successful long-term relationships begin with a common understanding of business goals and values. We prefer to meet with a potential operating partner outside of the tight timelines associated with an escrow in order to explore our respective business models.

Proposal

A potential operating partner provides Ratel with an investment proposal. Where possible, we prefer to begin our evaluation of a potential investment while the purchase contract is under negotiation rather than in the compressed timeline of an escrow period. Our typical proposal requirement is a financial proforma based on realistic assumptions, a competitive analysis, market analysis and a preliminary business plan.

Due Diligence

Ratel tours the proposed property, its competitors and analyzes the market data.  To the extent they are available, we examine third-party data such as an appraisal, property condition report and market study.  Additionally, we provide input on the debt structure.  Our business agreement is defined in a term sheet.

Funding Time frame

Ratel requires approximately 45 days from the signing of a term sheet to fund a new investment.  While funds can be delivered more quickly under certain circumstances, in many instances 45 days are required for Ratel to create our investor Private Placement Memorandum and for Ratel and our operating partner to jointly finalize an Operating Agreement.

Equity Co-Investment

Ratel’s principals personally contribute 10% of the total equity Ratel raises for an investment. Similarly, Ratel expects the principals of our operating partner to personally invest a meaningful amount of equity in an investment in order to align our interests in the success of the venture.

Ownership Structure

Each investment structure is unique and often driven by the requirements of the debt provider.  Typically, Ratel and our operating partner form a new single-purpose legal entity to hold ownership of the property.  Our operating partner acts as the managing member or general partner while Ratel and our investors are members or limited partners in the form of a separate single-purpose legal entity. As the managing member, our operating partner is responsible for overseeing the investment, including all capital improvement programs and the day-to-day management of the property.  Typically, Ratel retains limited approval rights for major decisions, primarily those pertaining to capital events such as refinancing and the sale of the property.

Distributions

Preferred Return:  Ratel and our operating partner receive a preferred return from on-going cash flow based on our respective equity investments in the asset. The target preferred return varies by investment and, typically, is distributed quarterly.

Excess Cash FlowAfter payment of the preferred return is satisfied, excess cash flow is shared between Ratel and our operating partner, providing the partner with an attractive promote structure.

Proceeds from Sale or RefinancingAfter payment of the preferred return and the return of all original equity, the proceeds from a sale or refinancing are distributed on a pro rata basis between Ratel and our operating partner, again, with an attractive promote structure to our partner.

Property Management

For many investments, Ratel’s operating partner is responsible for the day-to-day management of the property and all financial reporting for which they are paid a market-competitive fee by the property.  In some instances, by mutual agreement, day-to-day property management is handled by a third-party professional property manager who reports directly to Ratel’s operating partner.

Asset Management

For a nominal fee paid by the property, Ratel provides our investors with asset management services, including quarterly distributions, property updates and end-of-year tax statements.

Reporting

Following the funding of an investment, Ratel and our operating partner hold quarterly reviews of the property’s financial and operational performance and establish an annual operating budget.