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

Note: CPE credit is not offered on this program

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


Conducted on Thursday, January 30, 2020

Recorded event now available

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Program Materials

This CLE webinar will guide real estate counsel on the basic components of a real estate joint venture, including attention to provisions for allocating management rights and responsibilities, manager/developer promote, structuring capital contributions (and remedies for failure to fund), distributing available cash, addressing transfer rights and facilitating exit as a means of resolving disputes.

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 requirements 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. Structures generally (purpose driven)
  2. Management
  3. Capital Contributions
  4. Distributions
  5. IRR and promote
  6. Clawback provsions
  7. Transfer rights
  8. Exit Mechanisms

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

General Counsel and Senior Vice President
Fairstead

Mr. Hoffman is Senior Vice President and General Counsel of Fairstead where he oversees all legal aspects of the firm,...  |  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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