One of the challenges to both commercial real estate deal sponsors and investors with closing equity joint venture partnerships for individual property transactions is getting accurate information as to how other JVs are being consummated. Traditionally this type of information was swapped on the golf course but not shared in an organized manner.
If we knew what structures were actually getting sponsors and investors to team up, then we could be more realistic in our expectations of our counterparty’s requirements, and in our financial analyses, and we could get more JVs done faster and at lower cost.
There are a multitude of important facets to every JV Operating Agreement:
- capital contribution proportions and draw timing
- sponsor fees and loan guaranties
- operating deficit and/or construction shortfall liabilities
- the priority return of capital to the investor
- Preferred Returns and
- residual profit sharing Promotes, just to name a few.
And as with any other contract, the devil is in the details. The substitution of an “or” in place of an “and” in one of our partnership agreements can mean millions of dollars in profits forfeited or gained.
Re-introducing the CRE JV Deals Database
This week we are re-launching our CRE JV Deals Database, which is an online collection of anonymized equity JV partnership structure details for US-based CRE transactions. The data comes from actual sponsors and investors across the country who have submitted their operating agreement structures to REFM.
Deal structure data provided include:
- investment type and property type
- general geography and submarket
- total transaction dollar size, timeline and projected IRR and multiple on equity
- total transaction debt financing %
- number of equity players and % share of investment each
- sponsor credit, track record and lender contact network depth
- guaranteed fees and performance-based fee types and amounts
- loan guaranty, construction shortfall and operating deficit responsibility
- priority and shares of cash flow distributions
- return of capital
- preferred return rate and frequency of compounding
- promote
- waterfall tier IRR hurdle rates and equity multiple hurdles
- any unique split characteristics related to disposition
- any catch-up or clawback provisions.
Accessing the database for free
Click here if you are a sponsor or investor and are willing to share your deal structure on an anonymized basis. It’s quick and easy to fill out the Survey form and you will be granted database access upon your structure being approved.
