Co-GP

Co-GP equity is a form of common equity that is used to minimize the amount of cash that a sponsor must contribute to a real estate project. Often times, a sponsor will structure a 90/10 or 95/5 deal with an LP equity investor. The “90/10” refers to the LP equity investor contributing 90% of the total cash that is required for the deal whereas the sponsor contributes 10% of the total cash. Similarly, in a “95/5” structure, the LP equity investor contributes 95% of the total cash that is required for the deal whereas the sponsor contributes 5% of the total cash. Co-GP equity minimizes the amount of cash that the sponsor needs to contribute to the “10” or “5” percent slug. For example, if the total cash required for a deal equals $100 and the sponsor structures a 90/10 deal with an LP investor, the LP investor contributes $90 and the sponsor contributes $10. However, if a co-GP equity investment is made, the $10 that is required to be contributed by the sponsor shall be split between the sponsor and the co-GP investor in percentages that are subject to negotiation. In return for making a co-GP investment, the co-GP investor will share in the “promote” that the sponsor receives from the LP equity investor. Additionally, the co-GP equity investor may also share in fees that the sponsor receives from the joint venture with the LP equity investor for acquiring, financing, developing, asset managing, property managing, and disposing of the property. Therefore, a co-GP equity investor will receive a higher return on their investment than an LP equity investor.