Moving from acquisitions at a GP to doing your own GP deals?
I have about 5 years of acquisitions experience and just moved up to VP of acquisitions for my firm. Have been sourcing and leading my own deals for the last year, and have taken more responsibility with equity raising as well.
I have done 4 side deals where I am a minority GP with 10% carry, but I'm not signing on any loans or guaranteeing anything. I would like to branch out in maybe 2 years to do some of my own deals and am trying to understand how difficult it would be if I am also looking to raise equity through a raiser.
What is the typical NW requirements on smaller loans? Say I want to do a 90/10 LP/GP equity split on a $5M deal, assuming a $3M loan, I've seen it vary depending on multiple factors. Additionally, LPs typically need bigger deals ($10M+ tickets), is friends and family really the only route to go when looking to raise smaller amounts, say $1-3M?
Following
Following
Call your bank on your deals and ask.
Ya, I'm planning on doing this after close out these deals I'm working on.
On the raise itself, could you reach out to raiser with only a $3M target? Or would it be a self raise?
You can, it will just cost you alot. Not really in a strong position to negotiate rates. What I would do is consider talking to the partners where you are at now. Can it be a risk? Sure, but more often than not they would be interested in backing your deals. It allows them to deploy more capital and not have to take on additional risks associated with it. You would be giving up more of the return but it lets you get your foot in the door.
Curious what type of person/firm would provide equity raising as a service for deals of this size, and how much they would be compensated for it.
There are a ton of boutique debt/equity placements shops that do this, none of them are brand names you'd recognize, just regional 1-2 man operations with a rolodex of HNW investors looking to place money in RE deals. I've never used them but I'm guessing they charge the GP ~1% of capital placed as an origination fee regardless of what type of capital it is. I know of several small regional mortgage brokers that also source mom&pop deal equity on the side, just spoke to one recently that's been doing more preferred equity than debt lately.
NW covenants are usually equal to the loan amount collectively of all GPs with 10% liquidity (acquisition, not sure about development). Depending on lender, you can have a KP as part of the GP just for their balance sheet and pay them a small fee or promote piece for providing a guarantee (typically just bad boy). I have found very few institutional sources willing to write equity checks less than $5M-$7M (even those are tough to find), most are minimum $10M but those guys often would rather do bigger deals than that (same work/effort to do a $5M deal as a $50M deal). Friends and family is about your only option for a $2M raise unfortunately. The good news is that’s not a huge number to raise if you work your network. Another option would be to JV with someone who has equity connections if you bring more of the “boots on the ground” experience.
Enim animi distinctio facilis omnis cupiditate est error. Officiis incidunt eos harum eos sint. Rerum facilis et maiores accusantium itaque est. Vitae rerum autem ad odit.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...