Capital Structuring & Joint Venture Guide
Debt sourcing, equity partnerships, and joint venture structuring for CRE projects.
1. Capital Stack Fundamentals
Every CRE deal has a capital stack: senior debt, mezzanine, preferred equity, and common equity. The structure determines risk allocation, return profiles, and control rights.
Senior debt typically covers 60-75% of project cost. The gap between debt and total cost is the equity requirement — filled by sponsor equity, LP equity, or institutional partners like Canyon Partners (who Pat brought into L+O NoHo for $31M).
2. Joint Venture Structuring
JVs align a capital partner (money) with an operating partner (expertise). Structure the operating agreement to define promote splits, decision-making authority, capital call mechanics, and exit triggers.
Pat structured the 1801 SMB deal as a JV between a family office (land contribution) and Cypress Equities (development expertise + capital). The family retained their land position while the developer assumed construction risk.
3. Lender Relationships
Construction lenders want to see: experienced sponsor, pre-leasing or pre-sales, adequate equity, and a clear exit strategy. Pat has sourced construction loans from Bank of the Ozarks, regional banks, and CMBS lenders.
Permanent financing replaces construction debt after stabilization. Timing the transition — typically at 80-90% occupancy — is critical for optimizing the permanent loan terms.