So let's say that that LP puts in 95% of the equity, GP puts in 5%, they each get 8% pref on their equity, after that a 70/30 split investor/sponsor of the next 12% in returns, then 60/40 in favor of the sponsor thereafter.
What would you think is a fair split of the capital appreciation of the asset? Someone was proposing to me a 50/50 split of that. Does that seem reasonable?
In their scenario, pre-sale split of equity returns would be roughly 75/25, and after a 50/50 split on sale, it might move to like 72/28.
They said they would ideally like 50% of all the returns, which seems outrageous. I would think max that an LP would go for is an overall 70/30 split.
Seems you have the GP and LP contributions mixed up. If not...please let me know where I can invest as a LP in this type of structure in the future. I'm all in.
Are you referring to appreciation in terms of valuing the investment or in regards to an exit of the asset?
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