Co-GP Capital Firms?
Hey all,
Looking to gather a list of firms that specifically raise and place capital in the co-gp space. REPE focused, rather than owner, operator, developer.
I know Wells Fargo has a small division that does this. AECOM Capital follows this structure. Feel free to drop any names that come to mind. Thanks!
I believe the Bascom Group has enabled two offshoots : Milestone and Harbor
Always been a bit curious as to how those co-GP groups scale or make any real money. Seems like the type of operators looking for co-GP are either capital constrained or not Tier 1 types, so assuming the risk profile is a bit greater ?
Curious as well. I assume the more mature co-GP participates similar to a pref equity partner but has some level of control & requires a higher yield due to them likely signing the carve out guaranty.
I’ve noticed there has been a whale of a shop out in the west coast gobbling up multifamily at a pace that, on paper, does not really add up when you look at their leadership team. I’m assuming that behind the curtain is a big muscle co-GP that lets them get all the press but is signing the checks at the end of the day. Capital structure is a super interesting area of this business.
Exactly, it’s been super interesting to see. Would love to know more about these shops and who the big players in this space are . Talked to a guy who said their average realized IRR since founding the firm has been above 40%.
Which west coast group are you referring to?
My guess is Tides Equities
You would be correct.
Everyones guess lol
Anyone have specific companies or groups they know of in this space ? Please drop below! Thanks!
What team at Wells Fargo does this?
Aside from when they owned Eastdil, I was not aware they did anything in the equity space.
RanchHarbor
The only time I have seen a Co-GP relationship is for a development firm where they build garden-style multifamily on the outskirts of towns in the midwest. (really a bunch of sfrs and a tiny gym). I take it as the projects are either unsavory to LP investors or you just have a group of developers that want to spread out their equity.
Pearlmark
Silverpeak (bunch of former Lehman guys). Definitely a sharp team and they had pretty blockbuster economics on the two deals I worked on them with.
Co-GP is a really interesting space. Lots of people asking how it scales - think of it this way - there are two parties - Sponsor GP and Co-GP.
Similar to a GP / LP relationship, Sponsor GP puts up 5% of the capital and Co-GP puts up 95%. There is a predetermined split of the fees (property management, asset management, acquisition, etc.). Additionally, there is a waterfall structure on the cash flows (just like with a traditional GP/LP. This works out well (assuming returns are hit) as the Sponsor GP put up minimal cash but is paid is sweat equity. The Co-GP puts up the majority of the cash, but also gets paid via the promote of each individual deal plus fees. Both the GP and Co-GP can get outsized returns because they are still bringing in a traditional LP to each deal. Assuming returns are hit, the Sponsor GP gets ‘extremely outsized’ returns, the Co-GP gets ‘outsized’ returns and the LP gets their ‘general’ returns.
The strength of being the Co-GP is access to the ‘outsized’ returns and promote without having to do the work. I’ve seen Co-GP ventures where $100,000,000 gets put to work on a 95/5 basis, and if the returns are hit, everyone is happy post promote providing outsides returns.
Interesting. What value does the Co-GP bring to the table apart from cash? If the only value that the Co-GP brings to the table is cash, why would the sponsor rather have a Co-GP than reduce their GP Equity requirement and increase their LP equity requirement (1% GP - 99% LP instead of 10% GP - 90% LP for example)?
Usually cash. For starters, it’s always easier to have more cash than less. You get more deals done for the same amount of cash which means higher fees. The GP Sponsor may not have enough cash to do $100 MM of GP cash outlays. Also, no LP will do a deal where the GP puts 1% and the LP puts 99%. It’s usually 95%/5%. Though on rare occasions I’ve seen 97.5%/2.5%.
Having the co-GP fund means doing more deals which means more fees and more money.
I've seen Co-GP deals where the Co-GP flexes their balance sheet for better debt terms/non-recourse.
The main reasons developers want a co-gp are to help fund the GP portion of equity and, maybe even more importantly, to provide the guarantys.
Pearlmark is in that space
Other reason sponsors want co-GP partner that hasn't been mentioned is often due to co-GP's greater ability to raise LP capital/get good debt terms and/or handle asset management.
Clairmont Capital
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