We are close to entering into a JV agreement with a U.S. company for a large ground-up construction project for an industrial complex in the Western U.S. Along with our partner, we would like to sell the property a year or two after stabilization because both groups would like to reinvest in other opportunities. We like to move quickly so we do not want to get stuck in a situation where we are tied to a JV deal because the exit strategy and language was not properly thought out. What are the keys to a clean exit in a JV commercial real estate deal?
Answers
There are a number of possibilities that every sophisticated lawyer to enable the parties to exit a joint venture. There should always be a buy-sell provision, whereby one venturer can buy the other out. There can be a forced sale of the property at a pre-designated point of time. There can be a "baseball" arbitration to select a sale price. These and more possibilities need to be discussed with your current advisor, who should be able to create solutions depending on the desires of the parties. In circumstances where one party has more capital than the other, your advisor should offer advice, depending upon the position you are in.
You are asking for a way to mitigate market risk at the front end of the deal? A buy/sell or selling your interest in a secondary market would be about it.