Joint Venture and Co-GP Strategies: Case Studies and Lessons
Joint Venture & Co-GP Webinar - How to Close Deals with Peers & Partners in the Family Office Club
Sponsors, independent sponsors and family office members who are weighing their first joint venture or co-GP deal.
5 key takeaways
- Control the deal before seeking partners. Meg first got control of each deal and built a package. Only then did she interview co-GP partners. In her experience, a partner is more likely to be interested once there is a real deal to join.
- Choose complementary skill sets. Meg advises picking partners whose skills differ from yours. In her first deal, the partner was removed from daily work and the relationship felt more like an LP relationship.
- Put forward your best deal. She says the merits of the deal must stand on their own. She suggests doing your own due diligence and getting opinions from mentors, because a strong first deal can lead to repeat business.
- Spell out roles and fees early. Meg recommends defining who handles investor reporting and how the developer fee is paid. Meg notes that fees can be tied to time or to work done, and many sponsors talk through the split with the partner up front and review it with a securities attorney.
- Co-GP deals support scale. Partners can share due diligence costs, which Meg says can reach the hundreds of thousands on one industrial deal. They can also bring debt and equity, so the sponsor can focus on sourcing and operating.
The short version
A 77 unit mixed-use building near downtown Nashville was Meg's first co-GP deal. She controlled the deal first, built a package, and interviewed possible partners. She found an out-of-state fund through CCIM. In Meg's account, that partner helped with the debt and received a high preferred return, and Meg's side received the profit after it. Meg reports the project reached a 78% IRR. Richard C. Wilson hosted the Family Office Club webinar and questioned her on the details.
Meg runs CA South, a Nashville real estate development firm with over 225 million of projects underway. Five of her 12 deals used a co-GP structure. Richard C. Wilson also explains why people use these deals, including speed, focus and access to deal flow. Meg then explains a promote, preferred returns, and why roles and fees should be settled early. The session closed with live questions from attendees.
Facts and figures
- Meg's first co-GP deal was a 77 unit mixed-use building near downtown Nashville with a $9 million capital need and, by her account, a 78% IRR.
- Meg has done 12 deals, and five of them used a co-GP structure.
- In Meg's example, an 8% preferred return works out to about $80,000 per year on each $1 million invested.
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, promote and preferred returns and joint venture agreements. Do not use AI to write your own legal agreements.
Quotes from the session
"You want to choose partners that have complementary skill sets to yours and not the same."
"If you have a strong co-GP partner that will share those with you, then that's a huge benefit."
"When you set up a joint venture, it's really trying to find parties that are complementary to your core skill sets."
- 1Get control of the deal
- 2Build a deal package
- 3Interview co-GP partners
- 4Partner reviews deal and team
- 5Agree roles and fee splits
- 6Close and fund the deal
Related questions
- What is a co-GP in real estate?A co-GP in real estate is a second party who shares the management of a deal with the main general partner.
- What do capital partners expect from an operating partner?I would say capital partners expect three things from an operating partner.
- How do I structure a JV between a sponsor and capital partner?Start with who does what.
Questions about this video
What is a co-GP deal?
Meg describes it as a deal where one or two other parties join the sponsor at the management level. The role can be very limited or very broad. Many teams customize the arrangement to what each party contributes.
What is a promote?
Meg describes it as the back end of the deal, the profit left after the money partner gets its preferred return. She says in her experience the money side often wants a large share, sometimes half or more, of that back end profit. How the rest is divided depends on what the sponsor and partners agree, and many sponsors review this with a securities attorney.
Do co-GP partners require the sponsor to invest capital?
Meg says her team usually puts in capital, but less than people expect. It is negotiable and can be capped at a smaller percentage. She says partners become more flexible once they know and trust you.
Put this into practice with the waterfall calculator. See all co-gp and joint venture deals resources.
