![]() Partnering with an institutional joint venture partner brings immediate credibility to a real estate project. Institutional equity wants a programmatic relationship because of the efficiency it brings. Now, maintaining investment discretion as a sponsor within a programmatic structure is rare, but interests are aligned to do multiple deals. Institutional partners, on the other hand, have deep pockets, crucial to business expansion. This source of capital doesn’t scale well. The same way friends and family can run out of money with large deals, they can’t handle a lot of projects concurrently. There are large hurdles to overcome when doing the first deal with a new partner (which we will delve into later), hence it becomes much more efficient to do multiple deals with each partner. Time and time again, prospective equity partners ask what a sponsor’s pipeline looks like, because one-off projects are less desirable. Institutional partners don’t just want to do big deals they want to do a lot of big deals. In fact, it’s incredibly difficult to find institutional equity for investments below $5MM. Many equity partners won’t even evaluate projects below certain whole dollar thresholds. Institutional partners also see these advantageous economies of scale and, therefore, desire to do larger deals. Under equal outcomes, sponsors obviously do better financially with bigger deals than small ones. ![]() Sponsors know that many times it takes just as much work to do a $2MM dollar deal as it does to do a $12MM one. At some point, you run out of friends and family, limiting the ability to write increasingly bigger checks. One of the main advantages of institutional equity is the ability to do big deals. While there are significant disadvantages that one must understand, there are considerably more advantages that make engaging with astute institutional partners highly compelling. ![]() The focus of this article is to compare institutional joint venture equity with other private equity raises, such as syndication, friends and family, or high net worth individuals. We work with various types of clients so not everyone fits this profile, but quite a few have dabbled in less institutional sources at one point or another. Perhaps the check sizes have grown too big or their current sources can’t provide enough capital to satisfy their increasing pipeline and grow their business. Some of our clients seek a next evolution of capital when their previous equity sources have fallen short. ![]() These include opportunity funds, hedge funds, private investment firms, and even sophisticated family offices. We are not in the business of syndication, so the types of equity groups we’ve chosen to align ourselves with are all institutional in nature. As a capital advisor, we’ve placed joint venture equity into a variety of project types. ![]()
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