How GPs Are Structuring CRE Deals in 2025

In 2025, commercial real estate (CRE) general partners (GPs) are structuring deals with more creativity, discipline, and technological integration than ever before. Market volatility, higher interest rates, shifting investor expectations, and regulatory scrutiny are forcing GPs to rethink how they assemble capital stacks and manage deals from acquisition through disposition. Below is a detailed look at how deals are being structured, what’s changing, and the forces behind it all.

Commercial Real Estate Deal Structure: What’s Changing in 2025

1. More Layered Capital Stacks

GPs are leaning into more complex capital stacks to bridge funding gaps and maximize returns. The typical stack in 2025 often includes:

• Senior debt, sometimes from alternative lenders or credit funds
• Preferred equity, increasingly used to fill the middle of the stack
• Common equity, split between GPs and LPs with customized waterfalls
• Co-GP capital, a growing trend in which GPs partner with other operators or family offices to share risk and expand capacity

This layered approach allows GPs to preserve flexibility while de-risking the equity portion.

2. Creative Preferred Equity Structures

Preferred equity is being structured with greater nuance. Some LPs are demanding capped returns or lookback provisions to align interests over longer holds, while others accept lower pref returns in exchange for earlier payouts.

This is a direct response to rising debt costs and constrained cash flows, where GPs need to protect downside risk while still attracting capital.

3. Waterfall Adjustments for Investor Confidence

Standard “80/20 after pref” models are evolving. Many deals now include:

• Catch-up hurdles that kick in only after LP capital is fully returned
• Tiered promote structures that reward outperformance but penalize underperformance
• Investor-first distributions, where even GP co-invest returns are subordinated to LP principal recovery

These investor-friendly adjustments help GPs remain competitive in a cautious capital-raising environment.

4. Smaller Syndications with Sophisticated LPs

Rather than large pools of passive investors, GPs are courting fewer, more sophisticated LPs—often family offices, RIAs, and wealth managers—who demand transparency, better reporting, and direct access to operators.

This shift is accelerating adoption of investment management platforms like Covercy, which provide real-time dashboards, streamlined distributions, and full investor visibility.

5. Tech-Enabled Fund Structures

Single-asset syndications remain common, but GPs are increasingly launching:

• Open-ended income funds, which offer stability and reinvestment options
• Sector-specific funds (e.g., value-add multifamily in the Sunbelt)
• Custom SMAs (separately managed accounts) for large investors

The need for digital investor onboarding, capital call automation, and fund-level accounting is driving GPs toward more robust back-office solutions—again, a space where Covercy provides real operational leverage.

What’s Driving These Structural Changes?

🏦 Interest Rates & Debt Markets

With base rates still elevated, traditional financing is more expensive. Lenders are stricter, leverage is lower, and debt service coverage is under pressure. This creates a need for creative structuring, including:

• Mezzanine layers
• Preferred equity
• Seller carrybacks or earnouts

💰 Investor Behavior

LPs are more selective. They want downside protection, a more explicit alignment of interests, and quicker access to information. GPs must offer more than strong IRRs—they need to prove operational excellence and transparency.

🏗️ Market Uncertainty

Increased construction costs, softening rents in some markets, and sluggish transaction volumes are leading to:

• Longer hold periods
• More focus on cash-flowing assets over appreciation plays
• Conservative underwriting

📊 Regulatory & Tax Considerations

The potential for changes to 1031 exchanges, capital gains rates, and carried interest treatment has some GPs shifting to structures that allow more control over timing of capital events.

💻 Technology Adoption

LPs now expect tech-forward experiences, especially those coming from the private wealth world. GPs that provide automated distributions, real-time reporting, and easy access to documents have a significant competitive edge.

The Covercy Angle

For GPs adapting to this new world of deal structuring, Covercy’s investment management platform offers a tailored solution:

• Automate complex waterfall models and distributions
• Easily manage multiple deal types—funds, syndications, SMAs—from one platform
• Streamline investor onboarding and KYC workflows
• Offer a best-in-class experience to increasingly sophisticated LPs

In a tighter, more competitive market, having a platform that delivers operational efficiency and institutional-level transparency isn’t a luxury—it’s a necessity. Book your demo today.