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Co-GP Investments

NetLeaseX Capital and its capital partners are looking to make programmatic co-GP investments to support real estate investors and developers, including non-institutional sponsors and even new sponsors lacking financial resources but have deep industry experience, for the following:

  1.  “Shovel-ready” development projects, and
  2.  Value-add opportunistic projects.

In general, NetLeaseX Capital and its co-investors will invest up to 80% of the sponsor’s, or GP, investment.  The sponsor will receive a credit for all funds invested in the project to date towards the sponsor’s portion of the GP investment.  In addition, the sponsor will be required to guaranty repayment of the senior debt and be liable for any nonrecourse carveouts, environmental indemnities and/or completion guaranties.

By maximizing project leverage, sponsors can scale their platforms and assets under management.  In addition to providing co-GP capital, we’re able to access preferred equity and/or senior debt financing for your projects as well.

The information below provides a general outline of our co-GP program.

1. Investment Amount: $500,000 minimum, no maximum
2. Investment Structure: Preferred membership interest in the ownership entity
3. Preferred Return: 10% per annum, cumulative from investment date
4. GP Contribution: Approximately 15% to 20% of the total equity investment for which the sponsor receives the same 10% preferred return as the other members in the LLC and subordinate to and in a first loss position relative to the preferred equity and co-GP’s interests.
5. Common Interests: The co-GP investor will receive a proportional percentage of the sponsor’s common membership interest in the development entity for a nominal amount, as consideration for their co-GP investment in the sponsor’s project.  For example, if the GP investors would own a 50% of the common membership interest and the co-GP investor invests 50% of the total GP investment, the co-GP investor will own 25% of the common membership interest in the project.  In addition, the co-GP  investor will receive a proportional amount of any fees and costs authorized to be paid to the sponsor in the project.
6. Leverage: Low cost first mortgage debt from a third party lender is needed.  Ideal leverage is 65 to 75%.  We can arrange the senior debt at a very competitive rate and terms if you need help in doing so.
7. Development Entity Distributions:

Net cash flow from the operation and resale of the project will be applied in the following manner:

  1. Pay debt service on any project-related loans;
  2. Pay 10% per annum cumulative preferred return to the preferred equity investor;
  3. Redeem the preferred equity investor’s Class A preferred membership investment;
  4. Pay 10% per annum cumulative preferred return to the co-GP investor;
  5. Redeem the co-GP’s Class B preferred membership investment;
  6. Pay 10% per annum cumulative preferred return to the sponsor;
  7. Redeem the sponsor’s Class C preferred membership investment, and
  8. After all of the preferred membership interests have been redeemed (and all cumulative preferred return have been paid), all remaining cash flow from the operation and resale of the project will be distributed to the preferred equity investor, co-GP investor and the sponsor as the holders of the common membership interests.
8. Term of Investment: Maximum 5 years
9. Product Types: All real estate types, including land
10. Market: Nationwide
11. Decision Making: Major decisions (e.g. termination of manager, sale, or refinance) require the preferred equity investor’s approval
12. Senior Loan Recourse: The sponsor will be solely responsible for submitting financial statements and any necessary loan recourse and personal guarantys to the senior lender.
13. Preferred Investment Recourse: Non-recourse, except for standard carve-outs. A completion guaranty may be required on development or rehab projects.
14. Closing: Typically, 4 weeks. However, as fast as 10 days from the date of receipt of all requested due diligence items.

If you have any questions about how co-GP works and/or would like to discuss a potential financing, please call us at 513-621-1031 or send us an e-mail summarizing your project.

If you would like to discuss your project financing requirements, please call Ron Zimmerman at (513) 621-1031 or via online chat on this web site to discuss your situation or send us an e-mail summarizing your project and financing requirements.  You can also review our Due Diligence Submission List and Underwriting Loan Guidelines for various property types by clicking here.

Whitepaper on Raising Preferred Equity
September 2022

 

"Strategize with Preferred Equity"
Scotsman Guide Commercial Edition
December 2018