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Paid-in capital strategies
for General Partners

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Everything you need to know
about paid-in capital.

What is paid-in capital?

Paid-in capital refers to the amount of money that investors have contributed in exchange for ownership interests in an asset or fund. In the context of commercial real estate firms, paid-in capital could be the investment made by limited partners to acquire, develop, or manage real estate assets.

Uncalled Capital

Uncalled capital refers to the portion of the committed capital by the limited partners that has not yet been transferred to the general partners or the investment vehicle. It is essentially a commitment to provide a certain amount of capital when it is requested, or “called,” by the general partners.

In contrast, paid-in capital is the actual amount that has already been contributed or paid in by the investors. So, while paid-in capital resides in the investment vehicle for deployment, uncalled capital remains with the investors until it is called.

Committed Capital

Committed capital refers to the total amount of money that investors, typically Limited Partners (LPs), have agreed to contribute to a fund or asset as outlined in the partnership agreement. It represents a legal obligation of the investors to provide the agreed-upon funds when called upon by the General Partners (GPs) during the investment period.

Committed capital consists of both the paid-in capital (the capital that has been called and received by the firm or GP) and the uncalled capital (the capital that is committed but not yet called).

Idle Funds

Idle funds can be defined as the funds that are in possession of the General Partner but are not currently deployed or invested in income-generating assets or used for operational purposes. These are funds that are essentially waiting to be allocated and, until they are, they are not contributing to the returns of the fund.

In commercial real estate investment space, idle funds may also be referred to as “uninvested cash,” “unallocated capital,” or “excess liquidity.” The term used can depend on the firm, the fund structure, or the specific context in which the funds are being held.

At Covercy, we believe that every GP or deal sponsor who manages investors deserves access to centralized investment management & fund administration tools.

Choose from three investment management software packages based on your firm’s unique needs, including a forever-free version for up to three assets, that can grow and flex with you.

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CRE banking meets investment management software

cre banking - paid in capital

Covercy is the first software to bring together banking and commercial real estate investment management software. Covercy is designed specifically for General Partners managing commercial real estate portfolios & multiple outside investors. With Covercy, you can track asset performance across a variety of classes, including retail, office, industrial, and multifamily properties.

Some of the features offered by Covercy’s robust platform include portfolio tracking, performance analysis, deal management, CRE banking, automated waterfall calculations, distribution and capital call payments via ACH debit, and built-in financial reporting. These tools can help investors and asset managers monitor the performance of their real estate investments, assess risk, and make informed decisions about buying, selling, or holding properties.

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The benefits of using Covercy
to manage paid-in capital funds

Transparency

Investors expect detailed and transparent reporting on the allocation, deployment, performance, and management of the paid-in capital. Covercy makes all of that simple for General Partners.

Frequency

Regular fund management updates, typically on a quarterly basis, are typical in the commercial real estate world. With Covercy, GPs can provide a best-in-class investor portal for 24/7 real-time access to performance reporting for LPs.

Performance Reporting

Provide your LPs with detailed reports on the performance of the paid-in capital, including returns generated, expenses incurred, and any risks encountered or anticipated.

Compliance

Covercy’s reporting features automatically adhere to compliance and regulatory requirements and disclose any legal or compliance issues encountered by the fund.

Property-Level Reporting

Because Covercy is designed specifically for General Partners in commercial real estate, the platform’s detailed reports can be easily organized by individual properties within the real estate portfolio, including their performance, value, and any material changes or developments.

Paid-in capital in commercial real estate firms represents the actual funds received from Limited Partners, and it is crucial for the growth and operational requirements of the firm. It contrasts with uncalled capital, which remains with the investors until called by the General Partners. The handling of these funds involves strategic banking partnerships and careful consideration of security and liquidity, with adherence to reporting and transparency to maintain trust and compliance with investor expectations.

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Maximizing paid-in capital with high APY cash accounts

It is crucial for General Partners to manage idle funds effectively to maximize fund performance.

This often involves balancing the need for liquidity to meet upcoming investment opportunities, capital calls, or expenses, with the desire to generate returns on every dollar of capital under management. Different funds may adopt different strategies for managing idle funds, such as placing them in short-term, liquid, and low-risk investments until they are needed.

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paid-in capital - investor reporting

Paid-in Capital
High APY Example

While maximizing yield is important, the primary goals for GPs in managing paid-in capital are usually capital preservation and maintaining liquidity to be able to act on investment opportunities swiftly. Balancing these priorities often leads to choices that favor low-risk, highly liquid holdings over high-yield options.

However, Covercy offers the best of both worlds for GPs who manage high deposit balances and favor low-risk options. High APY on checking accounts is usually not very common, and when available, it often comes with many strings attached, such as balance limits, transaction requirements, or other conditional terms that may not align with the operational needs of a real estate investment firm. But Covercy gives GPs a no-strings-attached, FDIC-insured, and high APY option to keep paid-in capital a cash-generating revenue stream while it’s sitting in an idle state.

Below, we’ve outlined how much a GP could earn using Covercy banking tools vs. a traditional low-interest checking account. With a $5M deposit at the start of the year, compare how much a GP would earn in both scenarios in the table below.

$5m depositwith covercy
3.87% APY		with other checking accounts
0.07% APY
Q1 EARNINGS$53,492.97$3,460.55
Q2 EARNINGS$53,844.02$3,461.26
Q3 EARNINGS$54,198.45$3,461.97
Q4 EARNINGS$54,556.34$3,462.68
ANNUAL REVENUE$216,091.78$13,846.46

Not only can paid-in capital and other idle cash deposits become a revenue generator for GPs, but Covercy banking offers FDIC-insuranced protection and complete liquidity while also helping GPs keep funds organized under each property or asset they manage. 

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Why GPs Choose
Covercy CRE Banking

Exploring high APY solutions for paid-in capital can be advantageous for General Partners, as it aligns with the objective of optimizing fund performance and investor satisfaction.

 
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covercy - paid-in-capital oprtimized returns

Optimized performance

Covercy’s high APY accounts offer better returns on paid-in capital, uncalled capital, or other idle funds, optimizing the overall performance of the fund and potentially improving the total return for both GPs and Limited Partners. Every basis point of additional yield can contribute to the overall performance of the fund, optimizing financial results and potentially offsetting other costs associated with fund management.

covercy - paid-in capital cash management efficiency

Cash Management Efficiency

Efficient management of cash through Covercy’s high APY solutions can play a vital role in the overall investment strategy, allowing for a harmonious blend of liquidity, yield, and risk management. When executed well, the use of Covercy’s high APY asset accounts can improve operational efficiency by consolidating cash management activities and reducing the administrative burden associated with managing multiple lower-yield solutions.

covercy - paid-in capital competitive advantage

Competitive Advantage for Real Estate Firms

Utilizing high APY solutions can create a competitive edge by demonstrating to investors and Limited Partners the proactive management of all assets, including undeployed capital. Additionally, achieving better returns on paid-in capital can increase investor satisfaction and confidence, potentially leading to increased commitments from existing Limited Partners and attracting new investors.

covercy - paid-in-capital oprtimized returns
covercy - paid-in capital cash management efficiency
covercy - paid-in capital competitive advantage

Optimized Performance

Covercy’s high APY accounts offer better returns on paid-in capital, uncalled capital, or other idle funds, optimizing the overall performance of the fund and potentially improving the total return for both GPs and Limited Partners. Every basis point of additional yield can contribute to the overall performance of the fund, optimizing financial results and potentially offsetting other costs associated with fund management.

Cash Management Efficiency

Efficient management of cash through Covercy’s high APY solutions can play a vital role in the overall investment strategy, allowing for a harmonious blend of liquidity, yield, and risk management. When executed well, the use of Covercy’s high APY asset accounts can improve operational efficiency by consolidating cash management activities and reducing the administrative burden associated with managing multiple lower-yield solutions.

Competitive Advantage for Real Estate Firms

Utilizing high APY solutions can create a competitive edge by demonstrating to investors and Limited Partners the proactive management of all assets, including undeployed capital. Additionally, achieving better returns on paid-in capital can increase investor satisfaction and confidence, potentially leading to increased commitments from existing Limited Partners and attracting new investors.

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More about paid-in
capital & CRE banking

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