Our process for investing is straightforward and begins with selecting the right opportunities and ends with meeting the goals and objectives of our partners and investors. Our typical investor has an interest in alternatives to the stock market such as Real Estate or other Private Equity, however, all investors have a need for maintaining the right balance between liquid and non-liquid assets in their portfolio.
Frequently Asked Questions
What is Ernst Capital Securities?
What are Direct Participation Programs (DPPs)?
A Direct Participation Program (DPP) is a type of investment program that allows for flow-through treatment of the results of a business operation to the investor. You are able to enjoy the benefits of a direct investment in tangible assets without many of the complications and risks that normally accompany such investments. As an investor, you own a fraction of a company that is organized for the purpose of developing and/or owning real estate.
Real estate ventures are generally formed as Limited Liability Companies (LLCs) or Limited Partnerships (LPs). The partnership’s sponsors pool investors’ funds to make investments in real estate development projects or existing properties.
The managing member or managing general partner is known as a sponsor and is responsible for managing the business’ assets and running its operations. Depending on the specific offering, certain owner share classes may not be liable for losses beyond their own investment and do not participate in the partnership’s management.
What is a Private Placement?
A Private Placement is a type of investment offering that is exempt from registration with the Securities and Exchange Commission (SEC). Public and large private companies must register with the SEC, which can be very expensive and time consuming.
Typically, real estate projects are structured as LLCs or LPs and capitalized through a Private Placement offering allowing those efforts to save time and money. These offerings still go through a due diligence process, but many of the administrative costs related to SEC registration can be avoided. This is necessary for small investment programs or else much of potential profit may be eroded away through offering costs.
Private Placements are offered only to a select group of qualified individuals and businesses that generally must be accredited investors. Individual accredited investors have either a net worth of $1 million (excluding the value of their primary residence), net income of $200,000 for the last two years and the expectation of receiving the same income during the current year for single investors, or net income of $300,000 over the same time period for married investors.
How are deals identified and developed?
Are real estate DPPs suitable for all investors?
No, real estate DPPs are not suitable for all types of investors. Generally, you must be a sophisticated and an accredited investor to be eligible to make this type of investment. Accredited investors have either a net worth of $1 million (excluding the value of their primary residence), net income of $200,000 for the last two years and the expectation of receiving the same income during the current year for single investors, or net income of $300,000 over the same time period for married investors.
There are also minimum investment requirements. For most offerings, the minimum investment amount ranges from $25,000 to $100,000, but will vary depending upon the specific offering.
In addition to meeting the financial requirements, the investment must be suitable for your level of risk tolerance, investment objectives, timeframe, experience, and with respect to your other current investment holdings. One of our registered representatives will discuss all of this with you to determine if an investment is suitable.
How will I know if my investment is performing?
How long does an investment program last?
Our equity programs generally range from 7 to 12 years, though they may last longer.
Every program is unique and has characteristics that may allow for or necessitate them to be shorter or longer in duration. Real estate is often cyclical in nature and it may take time to wait for favorable market conditions to sell assets.
This illiquidity is important to keep in mind because there is no formal secondary market to sell your ownership interest. The long-term nature of these investments may make them unsuitable for some investors.
What are your current opportunities?
Don’t see your question?
We’d love to learn how we can help. Please write to us in the fields below or give us a call at (605) 271-7172 and we will get back to you as soon as possible.
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