Learn More About Real Estate Partnerships

What is a Real Estate Partnership?

The Granger Company forms Real Estate Partnerships for the purpose of acquiring and operating real estate properties.  A property in a Partnership is purchased with approximately 40% equity and 60% debt, and Partnership investors are investing in the equity portion of this transaction.

A Partnership typically holds a single investment comprised of  several buildings .  The rentals collected from tenants in these buildings, minus Partnership operating costs (i.e., carrying costs, leasing commissions, debt service, and maintenance reserves), form the monthly distributions to Partnership investors. 

The Partnership property is usually leased to a stabilized rate of 90%-95% occupancy within the first nine months of ownership.  All tenant leases are triple-net, meaning the tenants pay their own operating costs, taxes, and insurance expenses.

To date, The Granger Company has taken a lead investor position (20%-40% ownership) in each Partnership it has created, and has returned an average annual return of over 20% to investors.   

How do Real Estate Partnerships compare to REITs (Real Estate Investment Trusts)?

Both Real Estate Partnerships and REITs are companies dedicated to owning and operating income-producing real estate, such as warehouses, industrial buildings, shopping centers, and offices.  Both enterprises are geared towards the production of income through commercial real estate ownership and finance.

However, REITs are generally owned and managed by large companies.  They were created by Congress to enable small investors to make investments in large-scale, income-producing real estate.  They tend to hold a large number of properties, so they are bigger in total fund size.  Additionally, the minimum investment of a REIT is usually lower than Real Estate Equity Partnerships, and the investment is liquid.  Similar to mutual fund investments, REIT shares can be sold on any day that the securities markets are open for business.

A major difference between REITs and Real Estate Partnerships is the level of participation of the principals of the transaction.  Managers of a REIT typically own less than 1% of the total value of the fund, whereas The Granger Company owns between 20%-40% of the total value of its Real Estate Partnerships.  Principals at The Granger Company feel that the higher the management ownership in an enterprise, the more secure its investors should feel about the investment's return.  Indeed, the firm's Partnerships have returned, on average, 20% annually to its investors since inception. 

Ideal investors

Partnership investors are typically high-net-worth individuals who are interested in investing in real estate without the responsibility of operating the property themselves.  They should have an investment horizon of 5-10 years as these investments are not typically liquidated before the Partnership is dissolved and the underlying property is sold.

Minimum investment

A Partnership is made up of a number of membership units costing $10,000 each.  The minimum investment in a Partnership is five membership units, or $50,000.  Membership interests have limited transfer rights.

Investment term

These Partnerships require an investment horizon of 5-10 years.  At the end of the term, the property is sold, the Partnership is dissolved, and the remaining capital and proceeds are distributed to Partnership members.

Distributions

Partnership profits are sent monthly to members in the form of distributions to shareholders , and are ordinary income for federal income tax purposes.  Members are responsible for paying income tax on these distributions. 

Investment advantages

• The Granger Company's interests are aligned with Partnership investors because the firm owns a substantial portion of each Partnership (20-40%). 
• Highly qualified management is built into Partnerships.  With over 20 years of relevant real estate and property management experience, The Granger Company understands this market and can take care of all operational and investment concerns of the underlying property. 

Investment risks

As with any investment, there are a variety of risks of which investors need to be aware.  Among other things, these could include economic risk if the property is vacant for a portion of its term; or environmental risk if hazardous material is found on the property; or interest rate risk if rates rise and affect the return on the property.  In addition to consulting his or her own counsel, accountant and financial advisors, a prospective investor should review a Partnership prospectus carefully and rely on his or her own evaluation of the merits and risks of a Partnership investment.

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