Need advice for structuring Million $+ family CRE deal

[Taylor Rouse]

I have a family member who owns commercial property in a highly desirable (luxury) area on the east coast that has seen explosive growth over the last 10+ years. This area has a strong median income and solid rental rates. Today the property nets ~$150k/year, is entitled for multi-use and appraised at $3m. They're getting older and are tired of dealing with ongoing property issues. Have considered selling it, but are on the fence and haven't put it on the market. 

I have a background in residential construction, a business partner in commercial development and a high net worth investor who wants to park cash in real estate. Together we're confident can put together a solid team to build multi-use, retail + apartments that we've estimated would cost $10m-$13m for construction. Rough NOI estimate is $300k/year. The LP wants to bring 50% of construction costs and land purchase, although an amount hasn't yet been discussed with family. This is all very preliminary and haven't yet approached family because I believe they still want to have some involvement and thinking through how best to position this to make a deal happen.

I know the above leaves out many details, but I'm looking for advice on ways to structure a deal that would give my family an opportunity to sell the land, remain somewhat involved/retain some equity, etc. Would the best route be a profit interest in my LLC where they make money on the upside of the property?

Also, any advice on the best ways to structure this with the LP. Is it common to do a % IRR look back + return of capital?