CNL Strategic Capital Cuts Management, Incentive Fees on Non-Founder Shares

CNL Strategic Capital LLC, a publicly registered nontraded company, will reduce the base management fee and the incentive fee it pays on non-founder shares beginning Jan. 1, 2027, the company said.

Under an amended management agreement signed Nov. 9 with its manager, CNL Strategic Capital Management LLC, the base management fee on non-founder shares (Class A, T, D, and I) will fall from 2% to 1.5%. The total return incentive fee on those shares will fall from 20% to 15%. The annual preferred return stays at 7%. The breakpoint at which the manager’s catch-up ends will drop from 8.75% to 8.235%, in line with the lower incentive rate. The changes do not apply to founder shares.

The manager also signed an amended agreement with sub-manager Levine Leichtman Strategic Capital LLC that changes how the two firms split incentive fees on non-founder shares. The sub-manager will continue to receive 50% of base management fees across all share classes. Starting Jan. 1, on non-founder shares, it will receive 50% of the incentive fee tied to shareholder total returns of up to 11% and 80% of the portion tied to returns above that level. On founder shares, it will continue to receive 50% of the incentive fee. The sub-manager’s prior written consent is required for any deferral, waiver, or other change to fees paid by the company.

Both agreements run for one-year terms and can be renewed by the board.

The fee reduction comes months after a setback for the company’s liquidity plans. As AltsWire reported in June, the company’s proposed enhanced liquidity plan failed after falling short of the required two-thirds supermajority, even though about 20.1 million shares were voted for it and about 510,000 against. The plan would have set up a structured share repurchase commitment. The board has said it will consider a liquidity event on or before Nov. 1, 2027, the same date its current public offering is set to expire.

CNL Strategic Capital acquires controlling equity stakes, combined with loan positions, in middle-market businesses. The company had about $1.6 billion in total assets as of Sept. 30. It is based in Orlando, Fla. Levine Leichtman Strategic Capital is an affiliate of Los Angeles-based Levine Leichtman Capital Partners.

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