Can LP Investors Use Capital Markets to Find GP Business Planning the Same Way GP's use Capital Markets to Find LP Financing
Hey All,
Quick question here. My general understanding of the way that most deals go is that the GP comes up with a business plan and overarching financial model of how things should go, and then goes to capital markets to find an LP who screens the deal and chooses whether or not to invest.
My question is, can this go in the opposite direction? Say I'm the LP and I come across an off-market deal for a killer opportunistic apartment/office repositioning play. We have the money to throw at the deal, but don't have any experience with contracting/construction/property management and want to find a GP who can act as the jungle master to create a thorough business plan and act as the operating partner (while we provide the majority of the cash). Is this a common practice/ is it possible?
What would be the drawbacks of this?
Sure, this is done all the time. I'm with an LP fund and we have brought land site opportunities to various partners. There's nothing special about this and would incur the same risks any partnership would. We always want the GP to have 10%+ skin in the game and pay low fees to make sure both partners are incentivized by the back-end post-residual profit.
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