Rescue Capital Real Estate Transactions: Tax and Non-Tax Considerations

Description

Heading into the second half of 2025, it is clear that inflation, interest rates, decreased valuations, and geopolitical unrest, together with the uncertain future of major asset classes (particularly office and retail), will lead to a wave of distressed real estate transactions. This may result in a familiar pattern of workouts, bankruptcies, and foreclosures relating to existing indebtedness. There is also a less familiar trend emerging: rescue capital transactions.

Many real estate ventures with positive cash flows will find the need for recapitalization due to the current market environment where refinancing is unavailable, debt maturity may be approaching, and current valuations make dispositions unattractive and impracticable. At the same time, private equity firms and other alternative sources of capital, including family offices, have an unprecedented amount of "dry powder" in their reserves, and an interest in filling the gap.

These developments are generating great interest from both existing owners and potential investors in so-called "rescue capital" real estate transactions. Rescue capital real estate transactions, often structured as a hybrid between equity and debt, may present a number of important tax and non-tax considerations for both existing real estate investors and the investment sources looking to opportunistically provide such rescue capital.

Listen as our panel discusses key tax and non-tax considerations for rescue capital real estate transactions and provides planning techniques and considerations for parties engaged in such transactions.