How is a GP-led secondary or continuation vehicle financed?

Continuation vehicle mechanics and the financing stack

Why CVs exist: end-of-life funds may hold assets that have not reached optimal exit but must liquidate to return LP capital. A CV transfers those assets to a new vehicle, allowing the GP to extend the hold and giving existing LPs the option to roll over or take liquidity.

Structure: existing fund sells assets at a defined NAV to the CV. CV LPs include new investors (often led by a 'lead investor' that anchors the transaction at a defined price) and rollover LPs (existing LPs choosing to extend exposure rather than receive cash). The GP typically maintains a meaningful co-invest in the CV.

Financing stack: (a) new LP equity from anchor and follow-on investors; (b) rollover equity from existing LPs; (c) asset-level debt (potentially refinanced from the existing fund's leverage or new debt placed at CV launch); (d) NAV facility at the CV level for working capital and bridge financing.

Pricing the transaction: the asset NAV at which the existing fund sells to the CV is the central economics. Lead investor's price-discovery process (often supported by a third-party fairness opinion) defines the transaction value. Existing LPs receive their pro-rata share of the transaction proceeds in cash or rollover capital.

Lender perspective on asset-level debt: senior CRE debt on the CV-acquired assets typically requires consent for the change-in-control. A planned CV launch should include early lender outreach; most institutional CRE lenders will consent on commercially reasonable terms once they understand the new ownership and the CV's track record.

Sponsor playbook: a typical CV launch takes 9 to 18 months from concept to closing. Engage NAV-facility lender, asset-level debt counterparty, and lead-investor placement firm in parallel. The financing stack is designed integrated with the LP rollover process so the entire transaction closes in coordinated fashion.