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The Gordie Howe International Bridge between Windsor and Detroit is a major infrastructure project between two nations. But beneath the politics and engineering is a financial structure that closely resembles many real estate partnerships.

Canada agreed to fund the project when Michigan declined to provide upfront capital. Through the Windsor-Detroit Bridge Authority, Canada assumed the cost of design, land acquisition, construction, and supporting infrastructure on both sides of the border.

The project cost is approximately 6.4 billion Canadian dollars, or about $4.5B USD.

Under the original 2012 agreement, Canada would collect the toll revenue. That revenue would first pay operating and maintenance expenses. After those costs were covered, the remaining cash flow would be used to repay Canada’s capital investment and financing costs.

Only after Canada had recovered its investment would the remaining profits be split equally between Canada and Michigan.

That structure should sound familiar to real estate investors. It follows a common waterfall.

A later 15 year side agreement introduced a different revenue structure. During that period, net revenue is divided equally.

Net revenue means toll collections after direct operating expenses have been paid.

Canada’s half is applied toward construction and financing costs. The United States’ half is directed into a regional economic development fund supporting infrastructure in the border corridor.

This structure also has merit. There is no right or wrong.

The real question is whether the economics can support both objectives without placing the original capital at unreasonable risk.

That is the same balance we seek in a well-structured real estate partnership.

We need enough cash flow to operate the asset.

We need sufficient reserves to manage uncertainty.

We need a credible path to return investor capital.

And we need a profit-sharing structure that rewards everyone who contributes to the project’s success. But a waterfall cannot create money that the underlying asset does not generate. Structure matters, but economics come first.

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