Moving from acquisitions at a GP to doing your own GP deals?

Question

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.

CRESF · Accepted Answer

All well said. Typical net worth requirements for a loan are 1:1 NW to loan balance and liquidity of 10-20% of the loan balance. If you are going to fall short of one or both of those, like jackstraw said, you'll have to bring in a sugar daddy to provide a balance sheet. Those terms can be all over the board, depending on your relationship w/ the balance sheet provider. If it's strictly transactional, 20% of the promote seems to be a decent rule of thumb. But others just want to be able to throw money into the GP or want deal level returns (vs. diluted LP returns).

jackstraw001 · Answer

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?

NW covenants are usually equal to the loan amount collectively of all GPs with 10% liquidity (acquisition, not sure about development).

Ricky Sargulesh · Answer

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&am

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Moving from acquisitions at a GP to doing your own GP deals?

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Moving from acquisitions at a GP to doing your own GP deals?

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