Co-GP and joint venture deals

Co-Investing With Family Offices: Panel on Structures and Partners

Co-Investing: How to Partner with a Family Office to Close Your Deal

Sponsors and operators who want to bring family offices into a deal as co-investors and want to hear how both sides think about structure and fit.

What this talk covers

A panel of a single family office investor and three deal sponsors explains how co-investment with family offices works in practice. One sponsor keeps structures simple, with no management fees, no performance fees and no promote. The sponsor says 80% of the investors in their deals are single family offices and about 85% join every deal. Another panelist prefers payout-first structures, where the investment is repaid from cash flow before upside is shared.

The panel also covers how new relationships form. Sponsors describe due diligence trips for investors, referrals and long timelines, with commitments often coming within six months to a year. Tim, who runs a single family office, says the right capital partner brings expertise as well as money. The session closes with one sponsor describing a Memphis office purchase at what they describe as a 9 or 10 cap, at about a 60% discount to replacement cost.

5 key takeaways

1. Keep the structure simple. One sponsor avoids waterfalls, clawbacks and loaded fees such as acquisition, financing or disposal fees. They take a little more equity on each deal instead of a promote. They say they have never lost on a deal in 30 years, which is their own experience and not a guarantee.
2. Payout-first terms share risk. Tim prefers structures where cash flow first repays the initial investment. After that point, distributions shift to a more even split. He favors this over large front-end promotes.
3. Relationships take real time. Panelists say investors can take up to a year to commit. One sponsor spent about a year and a half on phone calls with a group in Dubai before it made a first commitment.
4. Choose the right capital partner. Tim says the best partner contributes something beyond money. Examples include market knowledge, experience with the rock in a new oil field, and understanding of the local operating environment.
5. Offer ways to see the work. Some investors want deep due diligence. One sponsor runs trips where six families visited properties, property managers and leasing brokers across several cities in a couple of days. Others only want to review strategy and track record.

Quotes from the session

Facts from this talk

• One sponsor says that in their deals, about 80% of the investors are single family offices and about 85% of investors join every deal.
• A sponsor says their approach is to get a deal under contract first, then aim to finish due diligence, financing and the equity raise within 90 days.
• A sponsor says Group RMC bought a Memphis office asset for 14 million that the prior buyer had purchased for 28 million, at what they describe as about a 60% discount to replacement cost.

General education only. Not legal, tax or investment advice.

Talk to a securities attorney to explore options around co-investment structures, fee and promote terms and offering documents. Do not use AI to write your own legal agreements.

Related questions

• How do I structure a JV between a sponsor and capital partner?Start with who does what.
• How should I split ownership with a money partner?Start with a preferred return for the money partner, then split the back end profit.
• What do capital partners expect from an operating partner?I would say capital partners expect three things from an operating partner.

Questions about this video

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