Real Estate Joint Ventures: Waterfall Structures, Developer Promote, IRR Lookback, Clawback and Catchup

Calculating and Structuring Promote, Planning for Phantom Income, and Taxation of Carried Interest

Recording of a 90-minute CLE/CPE webinar with Q&A


Conducted on Thursday, August 6, 2015

Recorded event now available

or call 1-800-926-7926
Program Materials

This CLE webinar will provide guidance to real estate counsel on the various methods of structuring waterfall provisions and promote payments to managers/developers in real estate joint venture agreements. The panel will examine the tax implications for distributions and promote payments.

Description

Waterfall provisions governing distributions are one of the most critical components of real estate joint venture agreements. After investors have received a return of their capital and IRR, promote payments are made to developers/managers.

While promote is usually structured on a ‘‘deal by deal’’ or a ‘‘whole fund’’ basis, there are a host of variations that enable managers/developers and investors to better align distribution of profits to the joint venture’s goals.

Allocation provisions must be structured to avoid phantom income associated with promote payments. Tax distribution clauses may be added to address phantom income. Other critical provisions include clawbacks, which allow investors to recoup promote payments if the investor did not receive its return on investment.

Listen as our authoritative panel of real estate finance practitioners discusses structuring waterfall provisions and promote payments in real estate joint venture agreements as well as the tax impact for distributions and promote payments.

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Outline

  1. Calculating IRR and promote
  2. Structuring promote
  3. Clawback and claw-forward provisions
  4. Tax ramifications and allocation provisions

Benefits

The panel will review these and other key issues:

  • What are the various methods for calculating promote?
  • What are the various methods for structuring promote provisions?
  • How can counsel anticipate and plan for phantom income?

Faculty

Nathaniel M. Marrs
Nathaniel M. Marrs

Partner
Latham & Watkins

Mr. Marrs represents domestic and international fund sponsors and other institutional owners and operators of real...  |  Read More

Alan Van Dyke
Alan Van Dyke

Partner
Latham & Watkins

Mr. Van Dyke's practice focuses on advising U.S. and global fund sponsors in connection with private equity fund...  |  Read More

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