Sponsors are often on the hunt for innovative ways to fund their real estate projects, particularly when they find themselves under capital constraints that limit their ability to invest. Some sponsors turn to general partner (“GP”) funds to meet their capital contribution obligations while maintaining the freedom to invest in additional projects.
Due diligence is key
Properties with triple net leases offer investors several advantages, but the primary one is the opportunity to receive a steady stream of income with minimal management responsibilities for the property. This is because the tenant is responsible for paying real estate taxes, insurance, and property maintenance.
In late December 2015, President Obama signed H.R. 2029, which includes provisions that created the Protecting Americans from Tax Hikes Act of 2015 (the "PATH Act"). The wide-ranging tax law makes permanent or extends three breaks that have proven popular with many taxpayers in the real estate industry. These provisions can make it easier for taxpayers to expense or recover the costs of certain types of property related to their businesses, rather than depreciating them over lengthy recovery periods.