$300M in Equity Co-GP/JV Deal Terms [Sponsors Needed]

TL;DR

A comprehensive overview of a co-GP program that offers 97.5% equity to US-based real estate sponsors for various property types.

Transcript

hello my name is richard c wilson i'm the founder of the family office club and i'm also helping grow a co-gp program to invest in u.s based independent real estate sponsors and i want to record this video to explain how the program works this is for those of you who have been maybe reviewing the term sheet are about to review the term sheet or may... Read More

Key Insights

• 🥶 The co-GP program provides an opportunity for US-based real estate sponsors to access significant equity (97.5%) for various property types.
• 🤱 Sponsors retain property management fees and a two percent fee on equity annually, incentivizing their participation in the program.
• 🥳 The program partner has ultimate financial control over the assets, while the sponsor has day-to-day operational control within agreed budgets.
• 🥶 The co-GP program focuses on acquiring brand new assets with a value-add or expansion component, targeting an ideal 17% IRR and a five to eight percent cash-on-cash return.
• 👏 Sponsors can use their own capital or raise it from investors to meet the 2.5% equity requirement.
• 😑 The term sheet is pre-approved and non-negotiable, as it follows the same structure for all participants.
• 🔬 There is no penalty for not utilizing the allocated capital, and the 20% promote starts from the initial equity invested.

Questions & Answers

Q: What is the equity split between the program and the sponsor in the co-GP program?

The co-GP program provides 97.5% equity to the sponsor, while the partner contributes 2.5% equity.

Q: Can the sponsor negotiate the terms of the co-GP program's term sheet?

The term sheet from the partner is pre-baked and rigid, with limited flexibility for negotiation. It is approved by the investment committee at a publicly traded entity level.

Q: Does the sponsor have control over the assets in the co-GP program?

The co-GP program partners hold absolute control over the assets, as they contribute a significant proportion of the equity (97.5%). The sponsor's involvement is focused on managing the assets within budget.

Q: Is there a penalty for not utilizing the allocated capital in the co-GP program?

No, there is no penalty or interest charged if the sponsor does not use the allocated capital. This differs from many institutional investment mandates.

Summary & Key Takeaways

• The program provides 97.5% equity for US-based real estate sponsors across different property types, including medical office buildings, multi-family, self-storage, industrial, and specialty healthcare.

• Sponsors retain property management fees and a two percent fee on equity annually, with investment typically lasting three to five years.

• Fees are split between the program partner and the sponsor, and the 20% promote is divided between the partner and the program.