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CONIFER REALTY, LLC

CONIFER REALTY, LLC. CONIFER REALTY, LLC. USDA RURAL DEVELOPMENT NORTHEAST REGIONAL BUYERS AND SELLERS CONFERENCE JUNE 30 – JULY 1, 2010 Susan Sturman Jennings. ACQUISITION OF REAL ESTATE VS. PARTNER INTERESTS. Generally, real estate is transferred Less risk to buyer

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CONIFER REALTY, LLC

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  1. CONIFER REALTY, LLC

  2. CONIFER REALTY, LLC USDA RURAL DEVELOPMENT NORTHEAST REGIONAL BUYERS AND SELLERS CONFERENCE JUNE 30 – JULY 1, 2010 Susan Sturman Jennings

  3. ACQUISITION OF REAL ESTATE VS. PARTNER INTERESTS Generally, real estate is transferred Less risk to buyer Necessary if doing a tax credit transaction

  4. Sometimes partner interest in the owner entity is transferred LP does not want to transfer because property is still in the 15 year tax credit compliance period GP has issues and RD wants to force him/her out Loans, subsidies, PILOT are not assignable or assumable by a new owner entity Opportunity for buyer to obtain control of the owner entity and buy out other partners at a later date Opportunity to keep seller’s basis in the property ACQUISITION OF REAL ESTATE VS. PARTNER INTERESTS

  5. Acquisition of Real Estate Value of real and personal property Market – rural, limited population Long term use restrictions (little growth in value) Rent limits Tenant income limits RD limits on return to owner Debt per unit Exit tax of seller DETERMINING PURCHASE PRICE – VALUING THE VARIOUS ASSETS BEING TRANSFERRED

  6. Acquisition of partner interests in existing owner Partner’s share of anticipated distributions (based on history) Partner’s share of anticipated capital transaction proceeds (difficult to price) DETERMINING PURCHASE PRICE – VALUING THE VARIOUS ASSETS BEING TRANSFERRED

  7. Management and development rights Income stream from management contract (limited by RD – work intensive) Opportunity to refinance, resyndicate, rehabilitate DETERMINING PURCHASE PRICE – VALUING THE VARIOUS ASSETS BEING TRANSFERRED

  8. Reserve Accounts (cash, but restricted accounts) Replacement reserves Operating reserves DETERMINING PURCHASE PRICE – VALUING THE VARIOUS ASSETS BEING TRANSFERRED

  9. Assumption of Payables GP advances and unpaid, but accrued distributions Accrued, unpaid management fees Cost of terminating the management contract and service contracts at closing Responsibility for reserve shortfalls DETERMINING PURCHASE PRICE – VALUING THE VARIOUS ASSETS BEING TRANSFERRED

  10. Contract Assignments to Buyer Rental assistance contracts PILOT agreements Loans Service contracts DETERMINING PURCHASE PRICE – VALUING THE VARIOUS ASSETS BEING TRANSFERRED

  11. Who must approve? RD (must approve new owner and new management agent – RD does not need to approve a transfer in LP interest) Seller limited partner consent Municipality granting PILOT Other lenders Other subsidy providers (e.g., HUD, local housing authority) TRANSFER APPROVALS

  12. Who obtains approvals? Time frame for making request What if you receive conditional approvals (i.e., the LP consents, but wants to be bought out too?) TRANSFER APPROVALS

  13. Who pays for approvals? RD does not charge Limited partners may charge for legal fees, tax hit, etc. Other lenders may charge a transfer fee TRANSFER APPROVALS

  14. CONIFER REALTY, LLC

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