Deal Structures | Splits
Equity Splits: 50/50, 60/40, and Beyond
There is no standard equity split. Anyone who tells you "the market is 50/50" is selling, not advising. Splits get set by the relative value of each contribution, the relative risk each party takes, and how hard the deal is to do at all.
Four Principles That Drive the Math
Land is rarely worth half
In Vancouver, where land is the single biggest input cost, landowners often assume 50% is a starting position. It rarely is. Once you account for capital risk, build risk, and sponsor work, the typical landowner share lands between 30–45%.
Capital wants pref + share
Capital partners almost always negotiate a preferred return before any common-equity profit is shared. The "split" therefore has two layers: the pref and the post-pref split.
Sponsor share scales with risk
A builder taking pure fees gets ~5% equity. A builder taking the GC role plus signing the construction loan PG gets 25–35%. The split should track the actual risk delta, not a round number.
Contributions get re-priced at refinance
When the project refinances at stabilization, the lender will re-test the equity stack. Splits that were "fair" on day one can compress sharply if the appraisal comes in low.
Realistic Split Scenarios
Land-rich / capital-poor owner + well-capitalized builder
Landowner
40-55%
Capital
0-15% (third-party debt does most of the lift)
Builder
35-50% including fees plus carry
Land value is credited at appraised worth; builder earns market-rate fees plus carry.
Three-way: landowner + capital partner + builder
Landowner
30-40%
Capital
30-40% (pref return first)
Builder
25-35%
Most balanced structure. Capital partner usually demands a pref of 6–10%.
Capital-led, landowner sells with back-end kicker
Landowner
5-15% kicker on back-end
Capital
55-70%
Builder
20-35%
Used when landowner wants most of the cash upfront but believes in upside.
Builder-led, landowner contributes with fee-for-service GC
Landowner
55-70%
Capital
0-20%
Builder
15-30% equity + market fees
Owner keeps most of the upside and treats the builder as a hybrid GC-partner.
Best For
- ✓ Anyone trying to negotiate an equity split for the first time
- ✓ Sponsors building a pitch for a landowner
- ✓ Capital partners checking that a sponsor proposal is reasonable
Usually Fails When
- ✕ One party anchors on a round number with no justification
- ✕ The split ignores who is actually carrying the risk
- ✕ You forget the waterfall is more important than the split
What To Verify Before Spending Money
- → Each party can defend their percentage with a contribution memo
- → Splits assume a defensible land value, not the landowner's wishful number
- → Refinance stress test: does the split hold if the appraisal comes in 10% low?
Official Sources Referenced
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