Many Sponsors have ownership equity in a Project. Often this equity is in Share Units and does not include a capital contribution. It is often based on "sweat equity".
When you are ready to record the Ownership Equity to a Position in a Project, (i.e. General Partner, Management, or Sponsor Equity), you can use this article to walk you through the process.
Table of Contents:
DISCLAIMER: Before you can record the GPs investment/equity, the actions below must be completed in your Portal first.
Action 1. Create a Separate Class
The Ownership Equity is typically added in a separate Class. You can add a Manager or GP Class to this Project using this article.
Action 2. Contact & Account
Each GP must have a Contact set up in InvestNext and an Account set up for this Investment. You can create a Contact and Account using this article.
Action 3. Position
You can add a Position in the Project for each GP Account using this article.
Once the above is complete, then you can move forward with recording an investment/equity for your GPs.
Step-by-Step Instructions:
STEP 1: Go to the 'Positions' tab in the Project and click on the GPs Position:
STEP 2: Click on the '+New Transaction' button. Then click 'Equity':
STEP 3: A pop-up menu will appear with the following fields:
Date: Add the date the investment starts accruing equity
Equity Class: Select the GP Class
Amount: Leave the Amount at $0.00
Specify Units: Click this button and add the number of Units
NOTE:
For GPs who are not contributing capital, you will use Specify Units button to record their equity. You will also leave the Amount at $0.00.
For GPs who are contributing capital, you will use the Amount field to record their $ investment.
STEP 4: Click 'Create Equity' to save!
How Percentage Ownership is Calculated using Units in a Class and across the Project:
In InvestNext, the Ownership Percentage in the Class is calculated using Units. The system uses the Share Units per Position and the total Share Units in the Class to determine the ownership percentages of each member in the Class. The system will treat all the Units in the Class as 100% of the Class's Units.
The system will also use the percentage ownership of each Class when calculating the overall ownership percentages for each investor. An example of this would be if the Management Class has 30% overall ownership percentage in the project and the Limited Partner Class has 70% ownership percentage in the project.
For example calculation:
If there are 9 Positions in the Management Class each with 10 Unit Shares, the system will calculate the ownership percentage for each of the Positions as shown below:
(10 Unit per Management Position / 90 Total Management Class Units) * (30% Overall Management Class Ownership Percentage) = .033 or 3.33%
3.33% is the ownership percentage for one management position in this scenario.
Video Demonstration:
The following video shows how to record a GPs investment/equity in a Project after a Position has been added.
TIP: The system may take a minute to refresh and generate the record in the Position.