Real Estate Joint Ventures Involving Private Equity Funds: Regulatory, Structuring, And Practical Considerations

INTRODUCTION

The real estate joint venture (JV) is an investment vehicle that marries investment or development competence on one hand with capital on the other to invest in a real estate platform. The investment or development competence is supplied by a "sponsor" (the individual or entity that creates, operates, and executes on the business plan for the JV) while the capital is generally supplied by a mix of debt and equity, referred to collectively as the "capital stack."¹ This article focuses primarily on the capital investment (or "LP")² arm of the JV, and, more particularly, a specific source of equity: the private equity fund (PE Fund).

In large-scale, commercial real estate investing, there are multiple avenues to fund the equity portion of the capital stack for a project. Most commonly, equity is: (i) self-funded by the project sponsor; (ii) syndicated among "friends-and-family" investors, high-net-worth individuals, or family offices; or (iii) raised by