Have a small development deal we have been raising money for and at this point have 5 LP groups who are interested, but they want the deal permit ready which is going to take me 8-10 months to do and about $500k which I don't have. Is this a situation for a CoGp? What are some shops that do pre-development CoGp deals?
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Their capital just isn't meant to be taking those risks with you. Sounds like you'll need a co-gp for sure as there are very limited LP groups that will share that risk with you unless it's a strong relationship or bulletproof deal. You will have slightly better luck with family office LP's. I can't think of any funds I know of that will take pre-dev risk.
Because they're paying your promote, so why should they share in the risk and also get lower returns?
We are willing to take a much lower promote for them to come in earlier.
Well present it and give it a go. LPs in my experience are willing to listen if you make it interesting enough.
Then negotiate that.
This is essentially the same as taking a co-GP. PM if you want to chat, i have co-GP'd a number of dev deals and know the landscape
What's the deal?
Many things can go wrong in the permitting/entitlement process and LPs aren't willing to take on those risks, especially when there are plenty of shovel-ready deals in the market that need to be capitalized. By going into a CoGP you lose out on much of the upside through development fees and the promote; however, sometimes you don't have a choice - personally seeing this in a few deals I'm working on now
Can't comment on all LPs, but certainly institutional LPs aren't paid to take risks, despite what they may tell you. Herd mentality, would rather plow their billion into middling deals after they feel the coast is clear.
Shoot me a note, familiar with co-GP firms.
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