In this short, Catherine Bell explains how an A3 disclosure document, referenced by a private placement memorandum (PPM), can be used to create a highly detailed, customized investment offering for investors. She walks through a specific deal structure featuring a 70/30 waterfall, an 8% preferred return, a 5% management fee, and explicit due‑diligence and acquisition costs. Bell contrasts two financing models: a real‑estate debt structure where the sponsor acts like a bank, charging a 12% loan with an 8% guaranteed return to investors and a 2% origination fee, versus an equity syndication where the sponsor partners with a builder, holds the asset, and distributes proceeds via a 70/30 split after sale, targeting a 35‑45% IRR. She emphasizes that by teaching ChatGPT the required metrics and calculations, the team can automatically generate investor‑ready documents, simplifying the decision‑making process and protecting the broader fund from failures in any single vertical.
Chapters
What the A3 disclosure doc does is it creates the ability to customize our, for example, our offer, our offering. But in ours, the PPM says go to the A3 disclosure doc for the offer. And so when you go to an A3 disclosure doc for this covered by that PPM, then we can be very explicit. Like we're going to do a 70/30 waterfall with an 8% prep. There's going to be a participation on our side of the, of the 30%, but we're also doing. 5% of management fee. We're going to do a $50,000 due diligence cost, $100,000 acquisition fee, and break all that down within that so that in that A-3, we're able to do all that because then it makes it simpler for the investor to know, okay, that's just the path I'm on. And not only that, but if we have a vertical that does go south, the entire fund's not infected by whatever happened on a vertical that failed. So the real estate debt structure, for example, is where we Basically right out the turnstiles, we're the bank, they're signing a bank loan. And then our investors are getting, are getting a portion of that, of that interest-only banking, if you will. We're providing them that million-dollar loan at 12%, but we're paying our investors a guaranteed contractual 8%, right? And we're holding that 4% as that processor. Now the builder also paid us 2% on the loan as part of the closing costs. So we took a 2% origination fee. So an equity syndication, it's set up in a way where we can do like a waterfall call for a, instead of the, it'd be more like a DP/LP situation where we GP with the builder. Instead of them getting interest only, what we're going to do is we're going to take the million dollars. We're going to hold that on the house for the 18 months. And then when we sell it, we're going to give them 70/30 from the proceeds. And so if we sold it for, say we sold it for $3 million and our net on it was a million, they will return their capital, their million, but then we're also going to give them $700,000 of the million that we got. And then at that point though, I got a 1 point— I think that's like a 1.7x multiplier to somewhere around the 40 or 30, 35 to 45% IRR. I don't have to wrangle anybody to give me this information because I can get this to do it for me. When we built it, we taught it, these are the metrics we need to have. These are the metrics we need to know. These are the things we need to understand in order for our investors to get documents that they will be able to consume and then invest with us.
