This Due Diligence checklist is designed to guide investor discussions with sponsors of an income oriented investment offering. Use it to evaluate sponsor credibility, alignment, income stability, and risk management practices.
Sponsor Background & Alignment
- What is your firm’s performance history with prior income-oriented offerings (projections vs. actuals)?
- How much of your own capital do you (and affiliates) have invested in this offering?
- How are you compensated (fees, promotes, carried interest)?
Do these align with delivering consistent income toinvestors?
Income Sources & Stability
- What assets or activities directly generate the distributions (rents, loans,royalties, receivables, etc.)?
- Who are the obligors/tenants/borrowers, what are their credit qualities orfinancial health and what collateral or guarantees back their obligations?
- How diversified are the income streams by sector, geography, and counterparty?
Risk & Downside Protection
- How would distributions be impacted underdownside scenarios (vacancy, default, rate hikes, economic slowdown)?
- What redemption, buyback, or secondary market options exist if I need early liquidity?
- How do current conditions (interest rates,credit spreads, cap rates) affect your income projections?
Oversight & Transparency
- What is your DCR ratio, and are distributions solely from cash flow, or is there any return of capital included?
- What level of reporting, third-party audits of all and related entities or independent verification do investors receive?
- Have you experienced any delays, defaults, restructuring, or regulatory issues in prior income offerings?
