Multifamily co-GP equity.
Co-GP capital for apartment sponsors: acquisitions, value-add and ground-up development. The co-GP partner funds 80 to 90% of your GP co-invest.
What is multifamily co-GP equity?
Multifamily co-GP equity is capital invested at the general partner level of an apartment deal. The co-GP partner funds most of the sponsor's GP co-invest and receives part of the promote in return.
In a typical joint venture the LP brings most of the equity and requires the sponsor to invest alongside it, often 10% of the total. On ground-up development the requirement is frequently higher. That GP check is what limits how many deals an apartment sponsor can close. A co-GP partner writes most of it.
Multifamily is the largest category we place.
Multifamily strategies we raise co-GP equity for
- Ground-up development. Sunbelt apartments in particular. Development carries the largest GP checks.
- Value-add acquisitions. Renovation and repositioning of existing communities.
- Workforce housing. Apartments priced for middle-income renters.
- Build-to-rent. Single-family rental communities.
- GP recapitalizations. Capital to replace or top up a GP facing a capital call, a loan paydown or a maturity.
We also place co-GP equity for senior housing, student housing and LIHTC and affordable housing. See all asset types.
How the capital stack fits together
| Layer | Who provides it | What it earns |
|---|---|---|
| Senior loan | Bank, agency, debt fund or life company | Interest |
| LP equity | Institutional or family office investor, up to 90% of the equity | A preferred return and a profit split |
| Co-GP equity | A co-GP partner, usually 80 to 90% of the GP co-invest | Its share of returns plus about 25 to 50% of the promote |
| Sponsor equity | The sponsor, the rest of the GP co-invest | Its share of returns, most of the promote and the fees |
We place both the co-GP equity and the LP equity, so the two can be raised together.
What co-GP investors want to see in a multifamily deal
- The sponsor's realized track record in the same strategy and market.
- Basis: price per unit against recent sales and, for new construction, against replacement cost.
- Rent growth assumptions and how they compare with the submarket's recent history.
- The exit cap rate and how it compares with where similar properties trade today.
- Debt terms, the construction budget and who the contractor is.
- The sponsor's own cash in the deal, the fees and the promote.
A multifamily example
A sponsor is buying a $100 million apartment community with $35 million of equity. The LP funds 90% of that equity and expects the sponsor to fund the other 10%: a $3.5 million GP check.
With a co-GP partner funding about 85% of the GP check, the sponsor writes $0.5 million and the co-GP writes $3.0 million. The co-GP earns the return on its $3.0 million plus 35% of the promote. The sponsor keeps control, 65% of the promote and its fees.
| Layer | Amount | Share of the deal |
|---|---|---|
| Senior loan | $65.0 million | 65% |
| LP equity | $31.5 million | 31.5% |
| Co-GP equity | $3.0 million | 3.0% |
| Sponsor cash | $0.5 million | 0.5% |
Repeat that across a pipeline and the same $3.5 million of sponsor cash closes seven such deals: $700 million acquired, with about four times the sponsor profit of doing one deal alone. See the numbers on programmatic co-GP equity.
Illustration, not a projection. Per deal: $100 million acquisition, $35 million of equity, 10% GP co-invest, 2.2x gross deal-level return over five years, 8% preferred return, 80/20 promote. Fees per deal about $2.6 million: 1% acquisition, about 1% of revenue asset management, 3% of revenue property management. The co-GP funds about 85% of each GP check for 35% of the promote. Terms are negotiated per program.
Development and value-add are underwritten differently
Ground-up development. The GP check is usually larger, often 10 to 20% of the equity, because LPs want more of the sponsor's money at risk during construction. Co-GP investors look at the land basis, the construction budget and contract, the contractor, the entitlement status, the construction loan terms and who signs the completion guarantee. They compare total cost with what it would cost to replace the building, and with what finished buildings sell for nearby.
Value-add acquisitions. Investors look at the purchase price per unit against recent sales, the renovation budget per unit, the rent increase the renovation is expected to produce and the evidence for it in renovated units nearby. They also look at how quickly units can be turned without emptying the property.
Recapitalizations. When a deal needs new GP capital for a capital call, a loan paydown or an extension, the co-GP looks at the current value against the debt, what the new money is used for and where it sits in the order of repayment.
The assumptions investors test first
- Rent growth. State the annual increases in the model and show the submarket's recent history beside them.
- Exit cap rate. State it, compare it with where similar properties trade today, and show returns at wider caps.
- Basis. Price per unit against recent sales. For new construction, cost per unit against replacement cost.
- Debt. Leverage, rate, term and whether the rate is fixed or hedged.
- Expenses. Taxes after reassessment and insurance, the two lines that most often surprise.
A deal that shows these on the first page gets a faster answer.
What the co-GP partner expects in return
- Its share of the returns on the capital it invests, on the same terms as the sponsor's own co-invest.
- About 25 to 50% of the promote on the programs we arrange.
- Approval over major decisions: sale, refinancing, budget changes and replacing the manager.
- Regular reporting.
The sponsor keeps day-to-day control, most of the promote and, typically, the fees.
What to send us
- Track record: deals completed, total cost, and realized results.
- The deal or pipeline: location, unit count, price or total cost, and the business plan.
- The model, with rent growth and exit cap stated.
- Debt quotes and LP equity already committed.
- Your cash going into the deal, the fees and the promote.
One deal or a program
A co-GP partner can invest in a single apartment deal or commit to a sponsor's next several. For sponsors with a pipeline, programmatic co-GP equity sets the terms once and applies them to each deal that fits.
Questions sponsors ask.
What is multifamily co-GP equity?
Capital invested at the general partner level of an apartment deal. The co-GP funds most of the sponsor's GP co-invest and receives part of the promote.
How much of the GP co-invest will a co-GP partner fund?
Usually 80 to 90% on the deals we arrange. The sponsor funds the rest.
What does multifamily co-GP equity cost?
A share of the promote. About 25 to 50% is typical on the programs we arrange.
Do you raise co-GP equity for ground-up multifamily development?
Yes. Ground-up development, value-add acquisitions, workforce housing and build-to-rent.
Do you also raise the LP equity?
Yes. We raise joint venture LP equity deal by deal or as a program, with typical checks of $5 million to $50 million.
Can co-GP equity be used to recapitalize an existing deal?
Yes. Co-GP capital can replace or top up a GP facing a capital call, a loan paydown or a maturity.
How large is the GP check on a multifamily deal?
LPs typically expect the GP to invest 10% of the equity, and often 10 to 20% on ground-up development.
What does a co-GP investor look at first in an apartment deal?
The sponsor's realized track record, the basis against recent sales or replacement cost, the rent growth assumptions and the exit cap rate.
Can the same partner fund several multifamily deals?
Yes. A programmatic co-GP commits to a sponsor's next several deals under terms agreed once.