LP

LP equity is an acronym for limited partner equity. LP equity is common equity and is typically invested by passive investors. One of the most common types of LP equity investors are private equity funds that rely on partnerships with local sponsors to execute business plans for their investments. The LP equity investor will provide most of the equity that is required for a project but will rely on their sponsor partner to identify the deal, execute the deal and sell the deal. Despite taking a passive role in the investment, the LP equity investor commonly has control over the joint venture entity that is created to own the property. Usually, the LP equity investor will “promote” the sponsor of the real estate investment by distributing a disproportionate amount of cash flow to the sponsor in an amount that is greater than the percentage of total cash that the sponsor invested into the deal. The “promote” is the sponsor’s reward for successfully executing the business plan for the investment.