Bankruptcy, Distressed Property, Removal of Manager

Overview

The term of a joint venture agreement might extend through up and down real estate cycles. Counsel must include provisions that contemplate contingencies such as manager defaults or “bad boy” acts under the JV agreement, defaults on a mortgage or other financing, and bankruptcy. If the property is perceived to be underperforming or mismanaged, the investor will want the right to act swiftly to protect its investment, particularly in connection with removing the real estate operator from its role as the manager.In addition to removing the operator as manager, investor protection may include minimizing or extinguishing the operator’s right to promote and other income and terminating third-party contracts entered into by and benefitting the operator. Conversely, the operator will want to protect its position by seeking notice and cure rights, restricting the definition of removal events, and negotiating the degree of loss of promote and other rights after removal.Listen as our authoritative panel discusses provisions which should be included in real estate joint ventures to address the potential downside to the transaction, the rights of the parties in the event the investors seek to remove the operator, and the impact of removal on distributions, buy-sell provisions, and third-party arrangements.

Outline

Real estate joint ventures: roles of operator and investor partner(s) when the deal is going as planned
Events that may trigger defaults under the JV agreement
1. Poor property performance, mismanagement
2. Loan default
3. Default or bad acts by the operator/manager
Removal of manager
1. Significant removal events
2. Notice and cure provisions
3. Impact on promote, capital contributions, distributions
4. Property management and other third-party contracts

Benefits

The panel will review these and other critical issues:

When should an investor be entitled to remove and replace the operator/manager of the joint venture?
What are the investor’s primary concerns vs. the manager in negotiating removal provisions in the JV agreement?
How might a change in management impact promote, capital contributions, and distributions?

Default Provisions in Real Estate Joint Ventures: Bankruptcy, Distressed Property, Removal of Manager

Overview

Outline

Benefits

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