When a real estate fund moves to close on a property acquisition, the treasury team faces a precise coordination challenge: aligning the timing of LP capital contributions with lender funding requirements and transaction deadlines. The mechanics of this coordination often determine whether a deal closes smoothly or stalls at the finish line.
Why Does Timing Create Such Pressure?
Real estate transactions typically operate on compressed timelines. A purchase and sale agreement might specify a 30-day closing window, while the fund's limited partnership agreement gives LPs 10 to 14 business days to fund a capital call after notice is issued. This math leaves minimal margin for error.
Property-level lenders add another layer of complexity. Most acquisition financing requires the sponsor to demonstrate available equity before the lender will fund. A lender providing 65% loan-to-value financing expects the fund's 35% equity contribution to be in place, not promised, but available, before releasing loan proceeds.
How Do Funds Bridge the Gap?
Many real estate funds use subscription-secured credit facilities (commonly called "sub lines" or capital call facilities) to manage this timing mismatch. These revolving credit lines are secured by LP capital commitments rather than underlying real estate assets, allowing funds to:
Close acquisitions on an "all-cash basis" for more competitive bids
Meet aggressive closing timelines without waiting for LP wire transfers
Satisfy lender equity requirements before LP funds arrive
Issue capital calls after closing to repay the facility
A $200M fund with $150M in uncalled commitments might maintain a $50M subscription facility, drawing on it to fund acquisitions and repaying once LP capital arrives, often within 30 days for straightforward bridging.
What Should a Capital Call Notice Include?
For property acquisitions, treasury managers typically structure capital call notices to include:
The specific property or properties being acquired
Total capital being called (often expressed as both dollar amount and percentage of commitment)
Pro rata breakdown by LP
Wire instructions and funding deadline
Purpose breakdown (acquisition equity, closing costs, initial reserves)
Most LPAs require 10 business days' notice, though some permit shorter windows. Funds often provide informal "soft notices" days or weeks before the official call, giving LPs time to prepare liquidity.
What Happens When LP and Lender Timelines Collide?
Consider a fund acquiring a $50M multifamily property with 60% leverage. The lender requires $20M in sponsor equity at closing. The fund issues a capital call on Day 1, with LP funds due on Day 10. Closing is scheduled for Day 15.
If an LP delays funding, or if the closing accelerates, the fund faces a gap. Subscription facilities exist precisely for this scenario: the fund draws on its credit line to satisfy the lender's equity requirement, closes the transaction, and repays the facility once LP contributions clear.
Without a subscription facility, the fund must either delay closing (potentially losing the deal) or find alternative bridge capital at higher cost.
The coordination between LP funding mechanics, lender requirements, and transaction timelines represents one of the more operationally intensive aspects of real estate fund management. Establishing clear internal workflows, and maintaining adequate credit facility capacity, reduces execution risk and preserves deal competitiveness.