Bayworth is a 50,000 square foot office building in Wyoming. It is owned by Worth Ventures, an investment partnership formed solely to acquire the building. Hangview holds an 80% limited partner interest in Worth Ventures and is its sole limited partner. The general partner of Worth Ventures is Young Lake Buildings.
Bayworth was purchased by Worth Ventures for $12,000,000 on January 31, 2015. Hangview contributed $9,600,000 to Worth Ventures to fund the purchase of the building. Additionally, Hangview contributed $1,000,000 (and Young Lake Buildings contributed $250,000) to fund building renovation costs on June 30, 2015.
Bayworth is sold for $400 per square foot on January 31, 2017. Estimated sale transaction costs (commissions, expenses, etc) are 2.5% of the sale price.
A preferred return incentive structure is incorporated in the partnership agreement of Worth Ventures. It stipulates that any and all distributions will be made 100% to all partners (including the general partner) in proportion to their respective percentage interests, until all partners have received an amount which would cause their capital contributions to the partnership, over the life of the partnership, to have yielded an annual IRR of 10%. After this IRR is reached, all further distributions will be made 60% to the limited partner and 40% to the general partner.
Additionally, the partnership agreement indicates that IRR is compounded monthly, assuming all contributions and distributions into/out of the partnership occur on the last calendar day of each month.
What are the proceeds Hangview should expect to receive as a result of the sale of Bayworth?