LSI 2010 Real Estate Joint Ventures conference materials.pdf

Donald E. Percival of Davis Wright Tremaine LLP Speaker 27: 10
(c)
(d)
May address by providing for seller financing of sale to
purchasing partner
Restraints on receiving partner’s ability to exercise
purchase rights because of limitations imposed on receiving
partner by statute, charter documents or board investment
policies
(i)
(ii)
Example: Fund life expiring in near future and
liquidation/payout imminent
Example: Limitations on size of investment in
particular property (in absolute $$ or as a % of
entire portfolio)
(iii) Example: Limitations on size of real estate
portfolio relative to investor’s entire investment
portfolio
3. Purchase would cause taxable termination of entity
4. Purchase may trigger a violation of loan covenants
C. Avoiding monkey business
1. Is sale of partial interest permitted, or must initiating partner
trigger with respect initiating partner’s entire interest?
2. May multiple initiating partners act in concert to capture control
premium by aggregating their interests and including crosspurchase
condition in ROFO/ROFR terms?
3. Affiliated partners should be required to speak with one voice, act
as a single bloc
4. Simultaneous activation of multiple strategies: Which transaction
takes priority?
5. Disguised attempts to require receiving partner to pay breakup fee
6. Disguised attempts to require receiving partner to pay brokerage
commission
7. May want moratorium on activation of all or certain exit strategies
during agreed honeymoon period
D. Other considerations
1. Typically require repayment, at closing, of any outstanding loans
made by selling partner (exception: selling partner has committed
“bad boy” acts)
- 9 -
Law Seminars International | Real Estate Joint Ventures and Funds | 02/09/10 in Seattle, WA