Limited Partnerships gaining popularity for property funds

Limited partnerships (LP) have become an increasingly common funding mechanism for property funds across New Zealand. Their popularity stems from their flexible legal structure which allow property funds to raise capital from a pool of investors. This article will provide a brief overview of LPs and their advantages for property funds.

Key Features

LPs must have at least one general partner and one limited partner who have entered into a LP agreement. This agreement is required under the Limited Partnership Act 2008, and once signed, the LP can be registered with the Companies Office. This agreement functions similarly to a shareholders’ agreement, setting out minimum standards of entry, permitted transfers, and the manner in which the LP may conduct business. Once registered, a LP operates in a similar manner to a company, being a legal entity and able to carry on business in its own name.

Similar to shareholders in a company, a limited partners’ liability is limited to their initial capital contribution. This is different to a traditional partnership where each partner is accountable for the liabilities of the partnership as a whole.

The general partner is responsible for the management of the LP. The general partner can be a company or individual chosen for their expertise in property investment. The general partner can also nominate other entities (such as a dedicated investment manager or property manager) to handle specific functions which they are skilled in.

Investors buy into the LP by way of a subscription deed and can be issued a unitised interest in the LP. This gives investors a direct ownership right to the assets of the LP in accordance with their percentage interest. However, apart from in specific circumstances, limited partners are unable to be involved in the management of the LP. The funds contributed by the limited partners are managed by the general partner, either by carrying on the development itself, through a dedicated investment manager or by providing funding directly to a development entity. The general partner would then return a distribution to the limited partners on a monthly, quarterly or annual basis or as determined by the General Partner.


The most significant advantage of the LP structure is flexibility. For property developers looking to raise funds. this means LPs can be set up as wholesale investor fund. Wholesale offers do not attract the same level of compliance and disclosure as offers to retail investors and  the LP is not required to prepare a product disclosure statement in respect of the offer.

Wholesale offers are only available to certain categories of investors.  These categories of investors vary depending on the nature of the offer and the type of entity making the offer. LPs can accept a wide range of these wholesale investors, including eligible investors, large investors, investment business and people who meet the investment activity criteria. This allows the LP to accept funds from a diverse set of experienced investors.

LPs also have advantages in terms of privacy over other funding structures. The only publicly available information is the registered LP and the name of the general partner. All other information, including each limited partner’s name and capital contributions, are confidential. In comparison, companies are required to keep certain records publicly available on the Companies Office such as the names, addresses and share capital of each shareholder.

There are no restrictions in the Limited Partnership Act on what can be used as committed capital for a LP. Units in the LP could be issued in exchange for investment funds or non-cash contributions such as property. This allows bespoke agreements where developers can partner directly with landowners on developments.

This flexibility also allows LPs to be integrated into an existing funding structure which could include other entities providing funding (such as a capital company or bank funding). This allows already established property development businesses to easily set up LPs to provide additional funding from investors who would otherwise be unavailable.

Next Steps

Because of their flexibility, wide range of eligible investors and confidentiality, LPs have become a favourite funding structure with property developers. Because of their unique nature, it is important to have a clear vision of the goals your LP is designed to achieve – Lane Neave can provide guidance, helping you build an effective LP designed to account for the specific needs of your property development business.

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