* Note that all of the screenshots included herein are used for illustrative purposes only, and may or may not relate to offerings that are subject to capital calls at any time past, present, or future.
1. What is a capital call?
A capital call is an additional capital infusion generally completed by existing investors in a deal. The sponsor of a deal will call for capital as outlined in the legal documents for the offering. Read more about capital calls in our in-depth article, Capital Calls in Private Real Estate Offerings.
2. Why has the sponsor of my investment issued a capital call?
Sponsors may issue capital calls for many reasons including, but not limited to, planned capital improvements, shortfalls in operating cash or reserves, debt service payments, etc. CrowdStreet asks every sponsor to communicate clearly and transparently with their investors about the details surrounding a capital call scenario. The sponsor may have sent you this information either in an email message or as an uploaded document, and it is recommended that you check both locations, as directed below.
- Messages: Navigate to your Messages page, then use the provided filter to show emails sent to you that relate to that particular offering.
- Documents: Navigate to your Documents page, then use the provided filter to show documents that relate to that particular offering.
3. Am I obligated to “answer”, or fund, this capital call?
Each capital call will be governed by the offering’s legal documents. You can review the relevant provisions in two ways:
- Summary: From your Portfolio page, click on the bulleted list icon to proceed to that offering’s detail page. In the Investment section, there will be a tab labeled “Capital Calls”, containing a summary of the offering’s capital call provisions. This section should also reference the relevant section(s) in the offering’s legal documents.
- Legal language: Navigate to your Portfolio page, click on the clipboard icon to go to your Investor Room for that offering, and scroll down to the Documents list. You can find the legal documents such as operating agreements or partnership agreements by filtering the list to “Closing Documents” and keyword searching for “op…” or “OA”.
4. Should I answer this capital call?
CrowdStreet cannot provide investment advice or otherwise recommend participating or not participating in a capital call. Please review all of the information provided to you by the sponsor prior to making a decision, and consider working in consultation with legal, financial, and tax advisors.
5. What happens if I don’t answer a capital call?
The consequence of not answering a capital call may or may not be explicitly outlined in the legal documents for your offering; please seek guidance from legal advisors when considering this approach. In most cases investors who do not answer capital calls have their investment positions effectively diluted due to the contributions of additional capital made by other investors. Called capital is also typically paid preferred returns (or otherwise granted preference to cash distributions and/or sale proceeds) ahead of the original capital contributed, as a way to offer financial incentives to those investors who contribute additional capital. In some cases investors who do not answer capital calls may lose voting rights or other rights granted through their offering legal documents.
6. I have additional questions about this capital call -- who should I ask?
Please refer all questions about a specific capital call to the sponsor of the offering. Additionally, please consider reviewing your rights and obligations with legal counsel and any tax consequences with your tax advisor. You can reach the sponsor directly by proceeding to the Investor Room for that offering and clicking on the “Ask a Question” button.