Joint Venture and Co-GP Deals: Case Studies from a Nashville Developer
Joint Venture & Co-GP Webinar - How to Close Deals with Peers & Partners in the Family Office Club
Real estate sponsors, independent sponsors and family office members who are weighing their first joint venture or co-GP deal.
Summary
Meg from CA South, a vertically integrated real estate development and investment management firm in Nashville, explains how co-GP partners helped her grow. Of her 12 deals, five used a co-GP structure. Her first was a 77 unit residential mixed use building with a nine million dollar capital need, done with a partner she found through CCIM.
Richard C. Wilson of the Family Office Club opens by explaining why sponsors use joint ventures and co-GPs. The reasons he gives are speed, focus and momentum. Meg then covers deal terms, how she found partners, how much capital a sponsor puts in, return expectations and her view of the Nashville market during the virus crisis.
- 1Get control of the deal
- 2Build a deal package
- 3Interview potential co-GP partners
- 4Split roles, fees and promote
- 5Complete due diligence and fund
The 5 big lessons
- Control the deal first. Meg got control of each deal and built a package before she interviewed co-GP partners. In her view, a partner only becomes interested once there is a real deal to look at.
- Pick complementary skill sets. She advises choosing partners whose skills differ from yours. Her first partner supplied capital and the debt guarantee and stayed removed from daily work, so it felt more like an LP relationship.
- Bring your best deal. Meg says to test the deal, get opinions from mentors and do your own due diligence. A deal that stands on its own is how a repeat relationship starts.
- Add experienced partners to the team. Without a track record, Meg brought in an architect and builder with decades of experience and a Nashville developer with 40 years in the market. She says this may mean giving up more of the deal.
- Share costs and scale faster. Meg says a co-GP partner can share due diligence costs, which can run into the hundreds of thousands on one deal. It also frees time, so a sponsor can own 30 or 40 percent of 100 million dollars in deals instead of all of one smaller deal.
Quotes from the session
"You want to choose partners with complementary skill sets, not someone with a similar skill set."
"Make sure the deal can stand on its own and put your best deal, because that's how you're going to start a relationship that gets repeated."
"When you set up a joint venture, it's really trying to find parties that are complementary to your core skill sets."
From the source
- Meg's firm has done 12 deals in Nashville, and five of them used a co-GP structure.
- Her first co-GP deal was a 77 unit residential mixed use building. Meg describes terms in which the partner took a high preferred return and she received the promote after it. She reports a strong result on that deal, which is specific to her situation and not a prediction for any other deal.
- Meg describes her industrial co-GP deal as one where the partner provided debt and equity and the developer fee was shared. Terms like these vary widely from deal to deal.
Sources
From Richard C. Wilson's Centimillionaire Strategies YouTube channel: Joint Venture & Co-GP Webinar - How to Close Deals with Peers & Partners in the Family Office Club. Quotes come from the video captions, lightly edited for readability. Figures are the speakers' own estimates and experience.
General education only. Not legal, tax or investment advice.
Talk to a securities attorney to explore options around co-GP fee splits, joint venture structuring and offering documents. Do not use AI to write your own legal agreements.
Related questions
- How do I find a joint venture equity partner?Start by naming your bottleneck, whether that is deal flow, investor access or deal setup.
- What do capital partners expect from an operating partner?I would say capital partners expect three things from an operating partner.
- How should I split ownership with a money partner?Start with a preferred return for the money partner, then split the back end profit.
Questions about this video
What is a co-GP deal?
Roles in a deal vary. Often a GP finds the deal, runs it and brings in investors. In a co-GP deal, one or two other parties join at the deal level. How roles and economics are split is something partners negotiate based on what each contributes, and many sponsors talk to a securities attorney about how to structure it.
How much time should a sponsor try to get for due diligence?
Meg says sellers in Nashville wanted a ten million dollar parcel closed in 90 days. She recommends trying to get about 120 days of due diligence, especially on a ground-up deal. She also suggests researching active partners in advance, so funding can take a month or two.
What returns do investors expect on development deals?
Meg says that in her experience, investors look for high teens returns over a 10-year hold on ground-up development. Return expectations differ by investor and deal, and nothing here is a promise of results.
Put this into practice with the family office fit check. See all co-gp and joint venture deals resources.
