A Joint Venture equity partner will reside in the lowest position of the capital stack, sharing in the General Partnership entity with the project Sponsor. Distributions are paid out in layered return hurdles, that are triggered after achieving predetermined Internal Rate of Return targets. This is commonly known as a “Waterfall”. Typically, after achieving IRR targets, the Sponsor is paid an additional Promote out of the remaining proceeds. JV Equity partnerships allow borrowers to take on larger transactions using less of their own capital, sharing in some of the financial risk in exchange for potential upside profit.
