GP/LP Splits and Coinvests · The MHP Pros Mastermind

GP/LP Splits and Coinvests

GP/LP Waterfalls and GP Co-invests

“What type of GP/LP waterfalls and GP coinvests get LP attention nowadays? This is a fairly intricate topic, but I'd like to share some data and discuss today.

The short answer on one foot:

- 70%+ split beyond a 7-8% pref

- 5-10% coinvest

Of course, the true answer is a lot more intricate. Here's the longer answer:

In the graph below you'll see which deals received wires (green squares) from all the deals we've sent (gray dots).

As a reminder, I do not tell GPs what splits or terms to go out at, and sending a deal and getting a wire on GP-LP Match is totally free - so this is a really interesting exercise in supply & demand.

A few things stand out:

- Sub 5% coinvest is unlikely to get funded, and you'd likely want to be in the 5-10% range (rolling in an acq fee is standard here). The opposite is true once you're above 10% ... you're more likely to get funded there with far less deals with that size of coinvest.

- On the waterfall, it's clear that most deals are getting funded at a 70/30 final split or higher ... this is the final split, and some begin at 80/20 or higher. This is a massive shift against a few years ago, where deals were getting done with multiple hurdles, or even a single 50/50 split.

- I posted some stats on this a week or so ago, but splits vary greatly by property type ... the below represents all property types but (as an example) LPs are currently open to more aggressive splits on some property types (RV Parks, IOS as an example) vs other property types (multifamily) ... these property level changes in expectation are purely driven by supply/demand from what I can tell

- The vast majority of deal flow has prefs in the 7-8% range now, with some GPs starting to go to 9-10% to stand out

I really hope this is helpful! What have you seen out there?

PS if you're in Phoenix for the IMN SFR conference, reach out ... I'll be there today 🫡“

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