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.
Related Terms
Preferred Equity
An equity investment that receives priority distributions before common equity but after debt service. Preferred equity provides additional capital above senior debt limits with returns typically in the 10-15% range. Unlike mezzanine debt, preferred equity is not secured by a pledge of ownership and has different foreclosure remedies.
Preferred Return (Pref)
A priority return that must be paid to investors before the general partner or sponsor participates in profits. Typical preferred returns range from 6-10% annually. The pref may be cumulative (unpaid amounts accrue) or non-cumulative. Once the preferred return is satisfied, remaining profits are split according to the promote structure.
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.
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