Capital
How an investment is structured, underwritten and funded — from the first screen to the last distribution.
Capital is the first of the six stages and the one every later stage depends on. The firm structures each investment around the deal, the partners and the position of their capital — one partner on a single building, several investors in one project, or programmatic capital across many — and runs the same underwriting discipline on all of them.
A term sheet; the underwriting model with its assumptions and sources; the venture or operating agreement; formed entities and project accounts; a capital-call schedule tied to milestones; and the reporting calendar for the life of the investment.
How a deal is capitalized.
Five steps, in the same order on every project. The structure around them is what changes.
- Screen
- Underwrite
- Structure
- Document
- Fund
Screen
An opportunity that has passed acquisition screening is put against the firm's capital criteria: the type of partner it suits, the scale of equity it needs, the debt it can carry and the hold it implies. Deals that fit a partner already in conversation move first.
Underwrite
The firm builds the business plan on its own numbers — land basis, hard and soft cost, contingency, schedule, financing and exit — each tied to a source. The plan is then stressed: cost over, schedule long, market soft. Only a project that holds under those cases is taken to a partner.
Structure
The investment is structured around the partners it will be built with: one or several, control or passive, capital held in the United States or abroad. Entity set-up, governance and tax position are settled with counsel on both sides before any document is drafted.
Document
Definitive documents are executed — the venture or operating agreement, the business plan as an exhibit, the capital-call schedule tied to milestones, the reporting calendar. Entities are formed and project accounts opened in parallel, so nothing waits on paperwork after signing.
Fund
The first capital call is issued against the first milestone, usually closing on the site. Later calls follow the schedule in the documents — permit, construction draws — and are administered in Construction, with reporting carried by Asset Management through exit.
From simple to institutional.
The structure follows the deal, the partners and the position of their capital. The same team runs all three.
Simple
One partner, one building. A joint venture whose terms fit on a few pages.
Syndicated
Several investors, one project. A managing member, a defined waterfall, one reporting day.
Institutional
Programmatic capital across projects. Separate-account or fund-style, third-party debt, institutional governance.
The relationship forms — joint venture, co-investment, programmatic — are set out under Working with L3.
The model, not a summary.
The model itself, handed over before any commitment, with every assumption stated and its source named.
The business plan
Land basis
Purchase price plus closing costs, carried as a basis per buildable square foot so it reads directly against land comparables in the submarket. Where a site carries unused development rights, those are valued separately.
Hard and soft cost
Hard cost from contractor bids or the firm's own recent projects, by trade. Soft cost itemized: design, engineering, expediting, filings, legal, insurance, carry and the cost of financing through completion.
Contingency
Carried as its own line on both hard and soft cost, sized to the stage of design and the type of work. It is drawn against documented change orders, not absorbed quietly into other lines.
Schedule
Acquisition to permit, permit to certificate of occupancy, and certificate of occupancy to sellout or stabilization, each in months. The schedule drives the carry, the financing cost and the timing of distributions.
Financing
The construction or acquisition debt assumed in the plan: lender type, leverage, rate, term and draw sequence. The interest reserve is sized to the schedule as modeled, not to the one hoped for.
Exit
Sale pricing by unit against closed comparables the firm names, or stabilized rent against leases in comparable buildings. Absorption and sellout timing are stated, not implied.
Sensitivities
Cost over by a stated percentage, schedule long by a stated number of months, exit soft by a stated margin — individually and together. Each case shows what happens to the capital, so the downside is in view before any commitment.
Capital held abroad.
A partner outside the United States needs a company here. L3 forms the entities, opens the bank relationships and runs the structuring conversation with the partner's own advisors — so the New York side is in place before the first dollar moves.
L3 does not give tax or legal advice. The structure is settled with the partner's counsel and the firm's before the documents are drafted.
The venture agreement sets out who decides what. The partner holds the major decisions. The firm runs the day.
The business plan, debt, a sale, budget changes beyond an agreed threshold.
Execution, day to day, within the approved plan.
Distributions per the agreement, in plain language. A fixed reporting cadence from first call to last distribution.