Syndication Nation

In commercial real estate, syndications allow investors to pool capital together. This structure provides limited partners (LPs) access to private real estate investments, allowing general partners (GPs) to manage and execute larger projects.

How do syndications work?

Partnership Agreement: Syndications are typically structured as LLCs, defining each member's role, the asset's business plan, and profit-sharing.

Capital Contributions: GPs generally contribute 5-20% of the equity, while LPs contribute the remaining balance.

GPs' Role: GPs oversee operations, execute the business plan, and make key decisions throughout the life of the investment.

LPs' Role: LPs are passive investors with minimal involvement in daily operations.

Capital Distributions: Profits first go toward returning initial capital and providing a preferred return to limited partners. After achieving metric-based thresholds set in the partnership agreement, profits are divided between the GPs and LPs. The split increases for the GP as the project performs better, rewarding them for higher returns.