Private real estate funds like Shepherd Premier Senior Living Fund operate under Rule 506(c) of Regulation D—an exemption created to give sophisticated investors access to non-public opportunities. Yet even among accredited investors, 506(c) funds can raise questions. Is my capital locked up too long? How do I verify legitimacy? Are these returns realistic?
This blog post tackles those concerns directly—helping you understand how a properly structured fund like Shepherd builds trust, complies with regulation, and creates long-term value.
Understanding the Basics of 506(c)
Rule 506(c) allows sponsors to publicly advertise their offerings, provided they only accept verified accredited investors. This means each investor must demonstrate a net worth over $1 million (excluding primary residence) or a high income threshold—ensuring suitability for high-risk, high-reward private placements.
Importantly, 506(c) offerings are not registered with the SEC, but they must file Form D and operate under clear disclosure obligations. That includes affirming the investment’s illiquidity, the lack of guaranteed returns, and the legal rights and responsibilities of both the General Partner (GP) and the Limited Partners (LPs).
Common Investor Concerns—Clarified
Let’s address the most common concerns:
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“Is my money locked up?” Yes, these are long-term investments. Shepherd typically has a 7–10 year hold with defined redemption rules outlined in the Limited Partnership Agreement (LPA). It’s not a stock—you don’t sell it next week.
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“What protects me if things go wrong?” The fund’s LPA includes governance clauses, removal rights for the GP under gross negligence, and defined capital call and distribution structures.
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“Are the returns guaranteed?” No. The fund disclaims guaranteed performance, but it does offer a preferred return (8–10%) before any carry is paid to the sponsor—aligning interests.
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“Can I resell my investment?” No public market exists, and the LPA restricts transfers. Any secondary sale typically requires GP approval.
How Shepherd Premier Builds Trust
Transparency is the cornerstone. Shepherd doesn’t just pitch “people over profits”—it backs that claim with:
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High caregiver-to-resident ratios
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Occupancy, IRR, and cash flow tracking available via automated dashboards
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Detailed legal documentation and disclaimers for every LP
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Quarterly financials and annual K-1s
This transparency builds investor confidence and aligns performance with both impact and returns.
Why Accredited Investors Choose 506(c) Funds
Sophisticated LPs often turn to 506(c) funds for three reasons:
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Access: These are not publicly traded REITs. Shepherd’s deals are niche, off-market, and often underpriced—especially at 14% entry cap rates.
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Control & Clarity: You know who’s managing your money. You see the docs. You understand the waterfall.
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Potential Upside: The fund’s model of buying high-yield assets and refinancing them at HUD-backed rates (~8% cap) creates clear financial upside.
Final Thought
506(c) funds may not be mainstream, but for accredited investors who understand real estate fundamentals and value transparency, they offer unique advantages. Shepherd Premier Senior Living Fund goes further—merging ethical care with long-term investor alignment.
For more information and an exclusive white paper, please call or text Derek at 808-721-8189.
