The difference between return of capital vs. return on capital depends on the structure of the syndicate. Usually limited partners are offered a preferred rate of return based on their capital account. This usually starts off equal to the amount of the initial equity investment, with the remaining profits split between the limited partners and sponsor. This structure follows that the preferred return is considered a return on capital and the profits exceeding the preferred return considered to be a return of capital. Supplemental loan proceeds, refinance proceeds, and sales profits may also be considered return of capital. Still other sponsors may consider everything aforementioned a return of capital, others a return on capital or a mixture of the two. You see it varies from sponsor to sponsor. These inclusions should be detailed under “Distributions of Distributable Cash” within the PPM. They may also be included under “Allocations of Profits, Gains, and Losses.” One point that’s cut and dry is that any return of capital reduces the capital account, and it follows that the preferred return distribution would also be reduced.