LSI 2010 Real Estate Joint Ventures conference materials.pdf

Donald E. Percival of Davis Wright Tremaine LLP Speaker 27: 9
(f) What is relationship between buyer conditions in third
party offer and nature of receiving partner’s obligations to
buy upon exercise of purchase rights?
(i) Would receiving partner generally have benefit of
same conditions following exercise of purchase
right?
(ii) Will interpretation of meaning of buyer’s conditions
depend on external circumstances (i.e., parameters
not clearly established in third-party purchase
agreement)
(A) Representations and warranties tied to
contents of document (e.g., rent roll) not
attached to third-party purchase agreement?
(B) Title conditions tied to list of encumbrances
accepted by third party purchaser
(C) Seller’s representations deemed modified by
information known to buyer
3. Purchase price adjustments for actual or imputed costs
(a) Assumption or payoff of liabilities (depends on transaction
structure)
(b) Prepayment penalties/yield maintenance fees
(c) Brokerage commissions
(d) Transfer taxes
(e) Other closing costs
(i) Title premiums
(ii) Escrow fees
(f) Working capital adjustments
4. Breakup fees -- quid pro quo for binding third-party offer
B. Practical obstacles to implementing the partners’ intentions and
understandings
1. Unequal access to information (e.g., initiating partner is property
manager or affiliate of property manager)
2. Unequal ability to perform as buyer
(a) Relative net worth of initiating partner vs. receiving partner
(b) Relative liquidity of initiating partner vs. receiving partner
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Law Seminars International | Real Estate Joint Ventures and Funds | 02/09/10 in Seattle, WA