GP LP structure in real estate: Challenges & opportunities

Investment firms raised $86 billion for North American commercial real estate through August 2025. Most of this happens under the real estate GP/LP structure. This model creates a division where general partners handle operations and limited partners supply funding, making large-scale commercial real estate investing possible.

This framework guides all areas of the real estate partnership. Here’s how stakeholders share risks and rewards.

What is a GP/LP structure in real estate?

The GP/LP structure is one of the most common approaches for real estate syndications and private equity funds. General partners leverage their expertise and market knowledge to find opportunities, create the investment strategy, raise capital from other investors, and operate the asset until exit.

Limited partners contribute capital and benefit from profits, cash flows, and appreciation when the property sells.

This differs from other structures like joint ventures or traditional single-investment ownership, where roles and responsibilities aren’t as clearly separated.

Key roles and responsibilities before the deal closes

GPs and LPs have different roles in private equity real estate deals before any capital changes hands.

GP	LP
Sourcing and underwriting deals	Review the opportunity
Due diligence and negotiating terms	Sign subscription agreements
Securing financing and guaranteeing debt	Provide capital contribution

GP’s role and responsibilities

Most of the GP’s initial work happens before LPs see potential real estate investments.

• Sourcing and underwriting deals: The general partner is responsible for identifying potential deals with opportunities for strong cash flows and appreciation.
• Due diligence and negotiating terms: GPs conduct due diligence on various real estate investments and negotiate the purchase price and terms with sellers.
• Securing financing and guaranteeing debt: The GP also decides on the optimal financing structure for the deal and personally guarantees the debt, which puts their own credit and personal assets at risk.

LP’s role and responsibilities

Even though the LP’s role is primarily financial, they’re not passive bystanders. They have a responsibility to understand what they’re investing in and who they’re partnering with.

• Review the opportunity: Limited partners evaluate the investment opportunity, the GP’s track record, and the specific strategy for the project before committing capital.
• Sign subscription agreements: LPs review and sign subscription agreements, which outline profit distributions and fee structures, and verify their accredited investor status.
• Provide capital contribution: Limited partners transfer funds into the project’s funding account to complete their capital commitment.

Key roles and responsibilities after the deal closes

After closing, the real estate syndication moves into its operational phase.

GP’s role and responsibilities

The general partner handles the following:

• Executing the business plan: Implementing the investment strategy. This might include renovations, repositioning the property, increasing occupancy, or other value-add initiatives.
• Asset management: The GP may oversee this internally or work with external property managers. Their responsibility is to maximize the property’s performance throughout the hold period.
• Investor reporting: They’ll also provide regular updates to LPs on performance metrics, progress against the investment plan, and expected distributions.

LP’s role and responsibilities

LP investors have some involvement after closing, like:

• Staying updated: LPs review investor reports and updates to track the performance of their investment.
• Tax obligations: LPs receive K-1s from the partnership and work with their own accountants to handle their individual tax filings.
• Additional capital: If the GP issues a capital call, LPs may need to contribute additional funds beyond their initial investment.

Financial structure of a real estate GP/LP deal

The financial components of commercial real estate deals include:

• Preferred returns and profit splits: Most real estate partnerships give LPs a set return percentage before the GP takes any profit share. After LPs receive this percentage, the remaining profits get split between GPs and LPs based on the agreed structure.
• Carried interest (promote) mechanics: Carried interest is the GP’s share of profits after LPs receive their preferred return. These are essentially bonus payments to the general partner for successfully executing the business plan.
• Common GP fees: GPs charge fees throughout the investment lifecycle to cover their time and expenses. These include acquisition fees, asset management fees, and disposition fees. Deals with construction or renovations include project management fees. Capital events like property refinancing generate additional fees.
• Waterfall structure and hurdle rates: The waterfall structure breaks profit distribution into tiers. Hurdles are the performance thresholds that determine when distributions move from one tier to the next.

Core components of a real estate GP/LP agreement

The limited partnership agreement includes the following elements:

Capital commitments and capital calls

LP investors commit to a specific amount of capital when they invest. GPs may issue capital calls to request additional funds as needed for operations or capital improvements. The operating agreement specifies timing, notice requirements, and consequences if an LP cannot meet a capital call.

Clawback provisions

Clawback provisions protect limited partners if the general partner receives excess distributions relative to final returns. The provision requires the GP to return funds to ensure profit splits align with the agreed waterfall structure.

Decision rights and governance

The partnership agreement defines which decisions require limited partner approval and which fall under the general partner’s discretion. Examples include major capital expenditures, refinancing, or selling the property. 

The agreement also outlines voting thresholds and the process for resolving disputes between partners.

Exit and liquidation terms

These terms outline the anticipated hold period and process for selling the asset. They also detail how proceeds get distributed at exit, following the waterfall structure for return of capital and final profit splits.

Legal and tax considerations in real estate GP/LP structures

Syndications or real estate funds operate under specific legal frameworks and tax structures.

Limited liability for LPs vs. fiduciary duties for GPs

LP investors have limited liability in real estate ventures. Their risk stops at their initial capital investment, and they have no personal liability for partnership debts or obligations.

GPs put their personal assets at risk because commercial real estate financing usually requires personal guarantees on loans. GPs also have fiduciary duties to act in the best interest of the partnership, manage the investment responsibly, and avoid conflicts of interest.

Pass-through taxation and K-1s

The partnership operates as a limited liability company or limited partnership. These are pass-through tax entities where income, losses, and deductions flow directly to individual investors each year. 

All partners report their share of income on personal tax returns via K-1 forms.

Securities compliance for offerings (e.g., Reg D)

Real estate syndications are securities offerings regulated by the SEC. Regulation D provides exemptions from full SEC registration as long as GPs comply with requirements around risk disclosure, investor qualifications, and filing rules.

Investing alongside the GP

Many GPs invest their own capital into real estate deals, which puts them on both sides of the GP/LP structure. This gives them “skin in the game” beyond just earning carried interest. If the project underperforms, they also lose money.

Co-investment shows that the general partner believes in the opportunity and gives them even more reason to make the project succeed.

Pros and cons of GP/LP structures

Like any partnership model, the GP/LP structure has its benefits and drawbacks for both parties.

General partner pros and cons
Pros	Cons
Scalability and growth	Personal and financial risk
Decision-making and control	Administrative burden
Aligned incentives	Operational responsibility

Pros and cons for GPs

Pros and cons for GPs in this model include:

Pros:

• Scalability: The GP/LP structure gives GPs access to larger capital pools, allowing them to take on bigger projects and grow their operations.
• Decision-making and control: GPs retain authority over investment strategy, asset selection, and portfolio management. This gives them flexibility to manage day-to-day operations and hit financial targets.
• Aligned incentives: The structure rewards GPs for performance. If they meet financial goals, they can increase their distributions through carried interest and performance fees.

Cons:

• Personal and financial risk: GPs personally guarantee debt and loans. If the investment underperforms, it can have a negative impact on their finances.
• Administrative burden: Managing reporting, distributions, and back-office operations requires time and resources. GPs must also support ongoing investor relations.
• Operational responsibility: GPs oversee all day-to-day operations and management. Poor decisions can jeopardize the entire project, property value, and future sales price.

Pros and cons for LPs

LP investors have the following pros and cons:

Limited partner pros and cons
Pros	Cons
Professional management	Illiquidity
Limited liability	Limited control
Tax benefits	Dependent on GP performance

Pros:

• Professional management: LPs gain ownership in commercial real estate assets without handling day-to-day management tasks like tenant relations, maintenance, or property oversight.
• Limited liability: Passive investors in syndicated real estate investments are only liable for their initial capital investment. They are not personally on the hook for loans or other partnership debts.
• Tax benefits: The GP/LP structure gets treated as a pass-through entity. This gives LPs access to passive income treatment, depreciation, and 1031 exchanges when the property sells.

Cons:

• Illiquidity: These real estate projects require LPs to commit their equity investment for the entire hold period. They cannot easily exit until the property sells.
• Limited control: The operating agreement limits voting rights. LP investors have little say in operational or strategic decisions, even if they disagree with the GP’s approach.
• Dependent on GP performance: LP returns depend on the GP’s ability to execute the business strategy. Poor execution directly impacts their investment outcome.

Trends shaping GP/LP partnerships

Technology and investor expectations are changing the GP/LP relationship.

Technology-driven reporting and workflows

LPs expect real-time access to performance data. GPs who can deliver transparent, technology-enabled reporting have a competitive advantage. Investors want to easily see progress against financial goals without waiting for monthly or quarterly updates.

GPs who can’t provide that level of visibility risk losing capital to competitors who can.

ESG and data-driven strategies

ESG has shifted from a nice-to-have to a must-have. According to Knight Frank’s ESG survey, 63% of institutional investors look for ESG-focused projects because they believe they improve returns. 

GPs need systems and data infrastructure to support these strategies across property analysis, risk assessments, and regulatory reporting.

Multi-asset portfolios and institutionalization

More investors are turning to funds and multi-asset portfolios to diversify risk beyond single-property syndications. This creates pressure on GPs to adopt institutional-grade practices with strong compliance measures, governance frameworks, and technology-enabled analytics.

How Agora streamlines GP/LP operations in real estate

Agora supports the entire lifecycle of private equity real estate relationships. This includes:

• Capital raising: General partners can use Agora’s CRM to organize potential investors and track each investor’s status during the subscription process. Potential limited partners can access an Investor Portal to review deal details and investment terms.
• Onboarding: The platform supports investor onboarding, including subscription agreements and verification of accreditation status.
• Reporting: Agora gives real estate investors real-time access to performance dashboards showing investment performance and distribution status.
• Distributions: GPs can automate investor payouts following the waterfall structure and distribute funds directly to LP’s’ bank accounts via ACH.
• Compliance: Agora integrates investor verification processes to help GPs comply with AML/KYC regulations.

Conclusion

Real estate’s GP/LP structure is how billions move into commercial properties every year. GPs handle the work, LPs provide the funding, and the waterfall structure makes sure both get paid based on performance.

Agora’s complete platform supports every aspect of this model so firms can raise capital faster, keep investors engaged, and grow their business.