A deep dive on GP-LP Match data
Capital allocation patterns, LP demand, return/structure trends
Happy Thursday!
We recently dove deep on a ton of data across 216 deals at GP-LP Match. I’d like to share the PDF with you today along with my thoughts on each slide.
As a reminder, if you’re a real estate GP raising capital or an LP looking for deal flow, it takes just one minute to register.
Here’s what we’ll cover:
Capital allocation patterns across property sectors: multifamily, industrial, retail, and more
Markets and strategies LPs are backing
Today’s return expectations
Deal structure trends
This is by far the longest article I’ve put together, so buckle up!
1. Capital allocation patterns across property sectors: multifamily, industrial, retail, and more
Above you’ll see an output of all non-fund equity transactions we’re sent across the platform - the rest of the presentation will all be based on the date we found on all of these transactions and wires that were received by the GPs within this dataset.
A few things to note:
216 deals is a decent sample size!
while the size of an equity raise impacts coinvest, I was still impressed to see a 9.6% coinvest average
On acq fees you’ll notice a very clear trend in the 1-2% range, with a few exceptions that are typically tied to property types that have smaller purchase prices
On the final LP split (if there are several hurdles in a waterfall this would be the last one) you’ll notice quite a range of what GPs are offering across different property types
This would be a good time to remind you to look at the sample size of any given statistic - for example the last two property types only have a single deal each (we’ll come back to Cold Storage and Medical Office later though)
We’ll discuss two types of datapoints below - demand and supply side data:
demand side is what the LPs are looking for (through their filters) or what types of deals are actually getting funded
supply side is what the GPs are submitting - note that we review each deal prior to sending to ensure accuracy of the data, but the GPs can obviously raise on whatever terms they want on the platform
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A few things to note on this one:
The top left hand corner appears to be in a world of it’s own (RV Parks and MHP), clearly showing that GPs in those property types typically have more aggressive splits. The higher acquisition fees are likely due to smaller purchase prices.
The largest sample size here is multifamily with 95 deals - 69% split to LPs with an average acq fee of 1.7%
I found this one to be interesting because there’s a clear trend of upward and to the right among purchase prices above $25mm. Below $20MM PP you’ll see quite a bit of variety, pointing to the fact that GP expectations on splits vary by property type.
A few things on this one:
We’ve only shared a single Medical Office and Cold Storage deals (bottom and mid right) - both got funded and this could be partially due to the property type and GP, but it’s hard to ignore how high their splits are LPs…this clearly matters
RV Parks have the most aggressive spits and the lowest coinvest (despite deal sizes being small many times!)
right above and to right there’s a small breakaway of the other fairly aggressive group, which includes retail, industrial, storage, and MHP
Every single LP can set filters, and this is a chart of the most excluded property types to get a sense of what people are NOT looking for.
I found it interesting to see how many people are excluding STNL and Hospitality
RV Parks and MHP somewhat high on that list, despite having some of the most aggressive splits and lowest coinvests (perhaps this is pointing to an demand supply imbalance)
Now we’ll turn to the LEAST excluded property types with Multifamily being the winner. Interesting to see Mixed Use up there as well, and Senior Living - both appear to be in high demand currently.
2. Markets and strategies LPs are backing
This, again, is a look at LP filters… interesting to see Texas top the list as the least excluded state despite all the negative headlines on foreclosures etc. I (right or wrong) expected Florida to be higher up and wouldn’t have guessed Tennessee or Georgia in top 5.
Now we turn to most excluded markets:
International makes sense due to complexity
California and New York are the clear “winners”
One way to think about this is that LPs don’t want to invest in these states, but perhaps another is just that this is the perfect time to look deeper into these markets because they’re (perhaps) irrationally out of favor
This is a really interesting chart showing the fact that as the sophistication of the investor (LP) increases (from individual, to family office, to allocator) you’ll see a much clearer mandate from this individual (i.e. MORE filters). I think this is very true on the ground when it comes to fundraising.
3. Today’s return expectations
Where are LP and Final LP split (if there are numerous we take the last hurdle) expectations set? I think it’s pretty clear that most people are in the 70%+ camp on filters with IRR above 12%. The 50% group above a 10% IRR is interesting as well.
4. Deal structure trends
Generally speaking, LP filters are set to see deals with sub 2% acq fees and a coinvest of 5%+.
Now we get to a new section! Anything in green is a deal that recently got a wire. A few thoughts:
Quite a few emerging sponsors (0-5 realized investments) are getting funded
The band of IRR is pretty clearly in the 15%-25% rang
Now let’s look at LP Split and Realized Investments … mapped against recent wires!
Very few investments are getting funded below 70% final split, but there are a couple! On the other end of the spectrum, there are a few deals with 80%+ splits that are getting funded (incentives work)
If you look at the 70% split line there are a lot of investments there
5-10% coinvest and 70-80% split range are both pretty clear trends here, I think. Green squares represent wires once again.
Biggest thing that stood out to me here is that there are very few deals that were recently funded with an acq fee above 2% - LPs are fee sensitive.
As promised, here’s the full PDF with a few more slides! I look forward to any questions and feedback, and hope you’ll take a minute to register - you can always reach me at aleksey@gplpmatch.com.
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