Programmatic co-GP equity.

What is programmatic co-GP equity?

Programmatic co-GP equity is a commitment from one co-GP investor to fund a sponsor's GP co-invest across a series of deals, under terms agreed once at the start. A single-deal co-GP investment covers one property. A program covers the pipeline.

The sponsor and the co-GP partner agree up front on the kind of deals that qualify, how much of the GP co-invest the partner funds, and how the promote and fees are shared. Each new deal that fits is then approved against those terms. Nothing is renegotiated.

On the programs we arrange, the co-GP partner usually funds 80 to 90% of the GP co-invest and receives about 25 to 50% of the promote.

Programmatic vs deal-by-deal co-GP equity

Typical programmatic co-GP equity terms

You will also see a program called a programmatic GP co-invest, a co-GP facility or a programmatic co-GP joint venture. They describe the same arrangement.

Why sponsors use a program

• Scale. When a partner funds 80 to 90% of each GP co-invest, the cash that used to close one deal covers many more.
• Fees on every deal. The sponsor earns its acquisition, development and asset management fees on each deal in the program.
• Certainty. The GP capital is committed before the deal is tied up, which matters to sellers, lenders and LPs.
• Control. The sponsor runs the deals. The co-GP has approval rights over major decisions.
• One relationship. One partner, one set of documents and one reporting format.

The cost is a share of the promote. Most sponsors conclude that a smaller share of the promote on many deals is worth more than all of the promote on one.

What co-GP investors look for in a program

• A track record in the same strategy, with realized deals.
• A pipeline the sponsor can describe: asset type, markets, deal size and pace.
• The sponsor's own cash in every deal alongside the co-GP.
• Clear fees and a clear promote structure.
• Reporting and an organization that can handle several deals at once.

A sponsor with one or two deals behind it is usually better served by a single-deal co-GP investment first, and a program after that.

A worked example: one deal or seven

Take a sponsor buying $100 million properties. Each deal needs $35 million of equity, and the LP expects the GP to put in 10% of it. That is a $3.5 million GP check per deal.

On its own, the sponsor has $3.5 million of cash and closes one deal. With a programmatic co-GP partner funding about 85% of each GP check, the sponsor puts $0.5 million into each deal and the same $3.5 million closes seven.

The sponsor gives up 35% of the promote on every deal and still earns about four times the profit, because the promote and the fees are earned seven times over. The track record grows by the same factor: seven assets owned and operated in the time it would have taken to build one.

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.

What gets negotiated in a program

• Commitment size. The total the co-GP will fund across the program, and the period it is available.
• Deal criteria. Asset type, markets, deal size, leverage limits and return thresholds. A deal inside the box is approved quickly. A deal outside it needs a separate decision.
• Share of the GP check. Usually 80 to 90% from the co-GP, with the sponsor funding the rest in cash on every deal.
• Promote share. About 25 to 50% of the promote to the co-GP is typical on the programs we arrange.
• Fees. Which fees stay with the sponsor and whether the co-GP shares in any of them.
• Decision rights. The major decisions that need the co-GP's approval: sale, refinancing, budget changes and replacing the manager.
• Exclusivity. Whether the co-GP gets a first look at every deal that fits, and what happens when it passes.
• Guarantees. Who signs loan guarantees and how that risk is paid for.
• Reporting. What the co-GP receives, and how often.

How a program differs from a GP fund

Some sponsors raise a small fund from individuals to cover their GP checks. That works, but it means running a fund: an offering, many investors, and reporting to each of them. A programmatic co-GP is one institutional partner under one agreement. It is faster to put in place and simpler to run, and the partner often brings its own LP relationships.

Common reasons a program does not get done

• The track record is in a different strategy from the pipeline.
• The pipeline is one deal and a hope. A program needs several deals the sponsor can describe.
• The sponsor wants the co-GP to fund 100% of the GP check. Investors want the sponsor's cash in every deal.
• Fees are high for the deal size, or unclear.
• The organization cannot yet run several deals at once.

Each of these can be fixed. We tell sponsors which ones apply before going to investors.

Timeline

1. Review. Track record, pipeline and current capital structure.
2. Structure. Number of deals, GP check per deal and the terms to ask for.
3. Placement. Introductions to co-GP investors whose mandate fits.
4. Terms. Term sheets, then a choice of partner.
5. Close. Documents signed once. Each later deal is funded under the same agreement.

How we arrange a program

We review your track record, pipeline and deal economics, then take the program to co-GP investors whose mandate fits your asset type and deal size. You speak with the investors who are a fit, negotiate one set of terms and close the first deal under it. We also raise the LP equity for the same deals when you need it.

Multifamily is the largest category we place. See multifamily co-GP equity, or the full list of asset types.

Questions sponsors ask.

What is programmatic co-GP equity?

A commitment from one co-GP investor to fund a sponsor's GP co-invest across several deals, under terms agreed once at the start.

How much of the GP co-invest does the co-GP fund?

Usually 80 to 90% on the programs we arrange. The sponsor funds the rest on every deal.

What does a programmatic co-GP partner receive?

Its share of the returns on the capital it invests, plus part of the promote. About 25 to 50% of the promote is typical on the programs we arrange.

Does the sponsor keep control?

Yes. The sponsor runs the deals. The co-GP partner has approval rights over major decisions.

Is a program exclusive?

Terms vary. Many programs give the co-GP partner a first look at deals that fit the agreed criteria. It is one of the points negotiated at the start.

Who is a programmatic co-GP facility right for?

Sponsors with a repeatable strategy, realized deals in that strategy and a pipeline of several deals.

How many deals does a program cover?

It depends on the commitment and the size of each GP check. In our illustration, a sponsor with $3.5 million of its own cash closes seven $100 million deals when the co-GP funds about 85% of each GP check.

How is programmatic co-GP equity different from a GP fund?

A GP fund pools money from many investors to cover the sponsor's GP checks. A programmatic co-GP is one institutional partner under one agreement.

Does the co-GP share in the sponsor's fees?

It is negotiated. In the programs we arrange the fees typically stay with the sponsor and the co-GP is paid through its share of the promote.

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