Here’s what makes our Real Deals Database such an amazing resource: we can see the anatomy of real Joint Venture transactions. These data points are typically kept under wraps, but Real Deals makes them available so Sponsors and Investors can know beforehand the likely range of expectations of their counterparty. With this information, Sponsors and Investors can begin their Joint Venture negotiations more reasonably and move more nimbly and swiftly to closing.
Transaction Profile
Geography in which investment is located: Southeast – U.S.
Market type in which investment is located: Suburban
Investment type: Value-Add/Repositioning
Property type: Market Rate Apartments
Total Transaction Size (Total Acquisition Cost): $11MM – $15MM
Total Transaction Financing (sum of all loans) % Total Acquisition Cost: 76% – 80%
Total Number of Equity Investor Entities, inclusive of the Sponsor: 2
Total Equity Investment Amount across all Equity Investor Entities: $2MM – $4MM
Sponsor Capital Investment % Total Equity Investment: 20%
Third Party Investor Capital Investment % Total Equity Investment: 76% – 80%
Pro forma timeline until transaction returns all Invested Capital: 5 years
Pro forma transaction start to end timeline: 5 years
Pro forma project-level Equity IRR: 21%-25%
Pro forma project-level Multiple on Equity: * Sample Multiple on Equity: $100 invested and total of $200 returned (net profit of $100) is a 2.0x Multiple.: 2.1x – 2.3x
Sponsor credit as perceived by the market at the time of partnership formation: Above Average
At the time of partnership formation, number of years of Sponsor experience in executing similar transactions for the Sponsor’s owned entities (i.e., not as employee or agent for another company): 2
Sponsor’s lender contact network: Average
Closeness of Third Party Investor to Sponsor: Had not previously invested with the Sponsor
Total amount of Guaranteed (non-contingent) fees to the Sponsor over the life of the transaction: $501K – $1MM
Guaranteed (non-performance based) fee types: Acquisition and Property Management
Return of Capital And Profit Partitioning
Return of Capital: Third Party Investor and Overall Sponsor Capital are returned Pari Passu
Is there a Preferred Return? Yes
To which party or parties is the Preferred Return paid? To both Third Party Investor and Overall Sponsor
Preferred Return %: 10%
Preferred Return Payment: Paid pro-rata to Capital Invested
Preferred Return Nature: Cumulative
Preferred Return Compounding: Quarterly Compounding
Preferred Return Payment Priority: Paid before Overall Sponsor Capital is returned, and Paid before Third Party Capital is returned
Preferred Return Payment in case of insufficient cash flow: Payment is deferred in any period where cash flow is insufficient to pay the full accrued amount
Preferred Return Payment Frequency: Paid Monthly
Is there just a single Split of Residual Cash Flows? Yes
What is the single Split of Cash Flows to the Overall Sponsor? 36-40%
What is the single Split of Cash Flows to the Third Party Investor? 61-65%
Shortfall And Deficit Liability
Construction Shortfall Liability: Borne pro-rata based on equity contribution among all equity parties
Operating Deficit Liability: Borne pro-rata based on equity contribution among all equity parties