Current through Register 2024 Notice Reg. No. 38, September 20, 2024
(a)
An asset based fee includes compensation to a sponsor computed in accordance
with this section.
(b) A program
may elect to compensate the sponsor according to the provisions of this section
only if the program meets all of the following:
(1) The prospectus states that a primary
investment objective of the program is to generate and to distribute to the
participants the cash flow from the operation of the properties of the
program.
(2) The anticipated life
of the program does not exceed 20 years from the date the offering is declared
effective by the Securities and Exchange Commission. However, the partnership
agreement may provide that the program will be extended by the affirmative vote
of a majority of the outstanding limited partnership interests.
(3) The program will invest not less than 82%
of the capital contributions in the purchase, development construction or
improvement of specific properties. The remaining capital contributions may be
used to pay organization and offering expenses, acquisition expenses,
acquisition fees, and any other related fees and expenses, provided such
expenses and fees are reasonable in accordance with Sections
260.140.113.1,
260.140.113.2., 260.140.113.3. and
260.140.113.4. The total amount of organization and offering expenses,
acquisition expenses, acquisition fees, and any other related fees and
expenses, whenever paid, shall be limited to the initial amount of capital
contributions not applied to the purchase, construction or improvement of
specific properties. Not more than 3% of the capital contributions invested in
the purchase, development, construction, or improvement of specific properties
may be included as a working capital reserve.
(c) The annual asset based fee shall be 0.75%
of the base amount. On capital contributions temporarily held while awaiting
purchase, development, construction or improvement of specific properties, the
asset based fee shall be 0.5% of those capital contributions. The sponsor may
also be allowed the following additional fees and compensation:
(1) A property management fee as provided in
Section 260.140.113.8.
(2) Real Estate Commissions as provided in
Section 260.140.113.7.
(3) A promotional interest as provided in
Section 260.140.113.5(a)(2)(B).
(4) Fees for insurance services as allowed by
Section 260.140.113.9.
(5) Organization and offering expenses,
acquisition expenses and acquisition fees as provided in subparagraph
(b)(3).
(6) Reimbursement for
program expenses as provided in Section
260.140.114.5.
(7) Fees, interest and other charges as
allowed in Section
260.140.114.10(a).
(8) Except as provided above, the sponsor
shall receive no fees or other compensation from the
program.
(d) An election
to compensate the sponsor with an asset based fee as provided in this section
shall be subject to the following limitations:
(1) The program may reinvest the cash
available from sale and refinancing of properties during the 7 years following
the date of its effectiveness with the Securities and Exchange Commission. No
deduction for organization and offering expenses, acquisition expenses,
acquisition fees, and any other related fees and expenses, shall be allowed on
such reinvestments. Beginning on a date 7 years after the date of effectiveness
with the Securities and Exchange Commission, no reinvestment of the cash
available from sale and refinancing of program properties shall be
allowed.
(2) The asset based fee
may be accrued without interest when program funds are not available for its
payment. Any accrued asset based fee may be paid from the next cash available
from sale and refinancing of properties. No asset based fee may be paid from
program reserves.
(3) A sponsor
that is terminated and entitled to compensation from the program as provided in
the partnership documents and governed by Section
260.140.111.6 shall be paid the
asset based fee through the date of such termination.
(4) Except as modified by this section, all
other rules governing real estate programs shall apply where appropriate to
programs electing an asset based fee.
(e) For purposes of this section, the base
amount includes that portion of the capital contributions originally committed
to the purchase, development, construction or improvement of specified
properties without regard to leverage and including working capital reserves
allowable under subsection (b). The base amount shall be recomputed annually by
subtracting from the then fair market value of the program's real properties as
determined by independent appraisals plus the working capital reserves
allowable under subsection (b), an amount equal to the outstanding debt secured
by the program's properties.
1. New
section filed 5-18-92; operative 6-17-92 (Register 92, No.
22).
Note: Authority cited: Section
25610,
Corporations Code. Reference: Section
25140,
Corporations Code.
