Buying Out Joint Venture Partners
It is not unusual for groups to partner with an equity stakeholder most commonly when embarking on a new project. Developers, in particular, often provide assistance with capital shortfalls or guarantees through construction which can help justify their equity stake. However, upon completion of construction there can be a diversion of long-term objectives between JV partners that complicates decision making and can create discord. In addition, groups become aware of a misalignment between the equity partners ongoing value and the compensation they are receiving. For all intents and purposes, the lease is creating all of the real estate value, and that becomes problematic when a portion of that value is shared with a party not contributing to the lease. Therefore, it is not uncommon for groups to investigate methods of decoupling their JV partner.
CMAC reviews the real estate operating agreements, models the feasibility of buying out the JV partner, assists in structuring the buyout and models the long-term returns.