Co-GP (Co-General Partner)
A partnership structure where two or more entities share the general partner role in a real estate investment, combining their capital, expertise, or track record to execute a deal. Co-GP arrangements are common when a local operating partner with market knowledge joins forces with a more capitalized sponsor to meet equity requirements or satisfy institutional investor due diligence standards. The co-GP structure defines each partner's responsibilities, economics, and decision-making authority.
Related Terms
JV Equity (Joint Venture Equity)
Equity capital provided by an institutional investor or partner to co-invest in a real estate project alongside an operating sponsor. JV equity structures typically feature a preferred return to the capital partner, followed by profit splits that reward the sponsor for achieving target returns. Common JV partners include pension funds, sovereign wealth funds, and private equity firms.
Promote (Carried Interest)
The disproportionate share of profits earned by a sponsor or general partner after achieving specified return hurdles for investors. A common structure is "80/20 over an 8% pref" meaning investors receive 80% of profits (sponsor 20%) after achieving an 8% preferred return, with the split becoming more favorable to the sponsor at higher return tiers.
Waterfall Structure
The contractual framework governing how cash distributions and profits are allocated among partners in a real estate investment. A typical waterfall has multiple tiers: first, return of invested capital; second, a preferred return (typically 6-10%); third, a catch-up provision allowing the sponsor to receive a larger share until a specified split is reached; and fourth, a promote split above certain IRR thresholds. Waterfall structures align incentives by rewarding the sponsor for outperformance while protecting investor capital with priority returns.
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