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 webinar with Q&A


Conducted on Tuesday, October 30, 2018

Recorded event now available

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Program Materials

This CLE webinar will guide 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.

Counsel must draft allocation provisions 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 high priority issues:

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

Faculty

Hoffman, Seth
Seth R. Hoffman

Chief Operating Officer and General Counsel
HighBrook Investors

Mr. Hoffman is HighBrook's Chief Operating Officer and General Counsel. Mr. Hoffman focuses his efforts on the...  |  Read More

Weber, Benjamin
Benjamin R. Weber

Partner
Sullivan & Cromwell

Mr. Weber has experience in a broad range of commercial real estate, corporate finance, and private and public...  |  Read More

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