Welcome to 2025.  I hope you will have a spectacular year.

As always, I was thinking about how one might be (my favorite phrase) Overpaid for Risk in 2025, and the more I think about it, the more my focus turns to so-called GP Capital.

There are challenges to investing in and using it, but I have spent a solid amount of time thinking through how to address (and solve) these challenges. So, I will stick my neck out here and make GP Capital a major focus for me in 2025.

What is GP Capital?

There are a whole bunch of interesting permutations to it, but generally, it is funding from a third party into the general partner/Sponsor of a real estate joint venture in return for which it gets a share of the Sponsor’s Promote.

I differentiate GP Capital from its (sort of) sister concept, Sponsor Capital, which is a fund raised by a Sponsor for its share of the necessary transaction capital. Notably, a Sponsor Capital Fund may obviate the need for GP Capital or, depending on various factors, could be used in conjunction with GP Capital.

Why is it so exciting?

It permits both the Sponsor and the Investor to be Overpaid for Risk.

  • The Sponsor is overpaid since it still keeps most of its Promote but with a much smaller investment.
  • The Investor is overpaid since it has the same investment risk as the LP but its return is juiced with a share of the Promote.

The foregoing is GP Capital at its simplest; however, my law firm partners and I have come up with a whole bunch of permutations for it and ways to put it to use.  

I have also found a large number of investor clients and relationships that find GP Capital to be of great investment interest and a large number of sponsors desiring GP Capital.

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To synthesize and augment this concept, I am launching a GP Capital HUB.

I am calling the HUB: The GP Capitol.

Yes, I admit that “Capital” is deliberately misspelled, but the idea is that the HUB is the Capitol of GP Capital.  

Roll your eyes if you must; however, the important thing is that you can give me a shout if:

  • You have a desire to invest in GP Capital.
  • You have a need for GP Capital.
  • You are interested in raising a Sponsor Capital Fund.

Investment sizes can range from (roughly) $1M to $50M, and they can range from one-off transactions to recapitalizations of significant portfolios. They can be structured as single joint ventures or more intricate platform-type investments. There is a great deal of flexibility.

However you are interested, there will be much to speak about, including the optimal structure and ideas we have come up with to augment your being Overpaid for Risk.

If you would like to be included, please respond to Kristen McMaster and Stacy Steele here.

Finally, I should add a word about Adler & Stachenfeld’s legal skills in this space, and without reservation, I will say that this is at the heart of our vaunted Joint Venture Practice. GP Capital involves complexities of interlocking joint ventures, which require a legal team with great skill, brainpower, and expertise.  We have handled not hundreds – but thousands – of joint venture transactions in almost thirty years of existence, and my partners are best in class in this space. I have summarized this on our website.

Sincerely,

Bruce Stachenfeld aka The Real Estate Philosopher™