Personal Guarantee from an LP?
Have you ever seen a scenario where a GP developer asked the LP to co-guarantee (50/50) the project loans?
Would you ever, in any circumstance entertain that idea?
Have you ever seen a scenario where a GP developer asked the LP to co-guarantee (50/50) the project loans?
Would you ever, in any circumstance entertain that idea?
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As LP you shouldn’t be guaranteeing any completion or repayment. Sounds like the GP doesn’t have the balance sheet to support the deal. If the LP provided the guarantee I’d ask for compensation and or a promote.
I would think that the GP could give up something in the promote structure so that the LP will provide the guarantees- balancing upside with downside risk. If that isn't possible, I don't know how any new developers could do their first deals unless their families are rich.
Lots of ways to structure the guarantees. Typically you compensate the guarantor (can be anyone, GP entity, someone within GP who personally signs, LP, totally separate 3rd Party) with a fee and/or piece of the promote. There's no right or wrong way to do this, and it's one area where smaller developers need to get creative in order to get things done.
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