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Capital Calls in a Private Commercial Real Estate Deal
When we talk about capital calls in a private commercial real estate deal, it's important to note that we're referring to what we call as unplanned capital calls. Those are scenarios where a project requires an infusion of capital that was unforeseen when the partnership was originally formed. When you invested in a project, you weren't expecting to contribute more money to it, but years later, you're being asked to do so. In those provisions, look for any punitive language that may be enforced. If you elect not to participate, this is what is referred to as a punitive dilution in a private equity investment.