What is a Co-General Partner in a Syndication?
The use of a co-general partner in a syndication can change from deal to deal. But essentially, a Co-GP relationship is when two or more sponsors come together to combine their complementary skills to sponsor a deal. One brings a skillset to the table that the other doesn’t have.
For example, suppose one sponsor is a strong developer while the other is experienced in capital raising. In that case, they may choose to form a Co-GP relationship to sponsor a development project. Alternatively, a Co-GP in a syndication could simply sign onto a deal to enhance the syndication’s creditworthiness by offering their balance sheet to help secure favorable credit.
Lastly, a co-general partner in a syndication could come into a deal to help with liquidity in a big deal. For example, if a sponsor is doing a big deal, like developing a $200M multifamily property, they will be faced with a sponsor contribution requirement of 10%. For this deal, the property is leveraged to its maximum of 60%, which still means the sponsor must contribute $8M. In these situations, co-GPs can step in to help with the sponsor’s share in return for a portion of GP interest in the deal.
While there’s no single definition of a Co-GP, investors should know that their involvement in a deal should always bring added value.
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