All Forum Posts by: David Miller

@Jay Hinrichs I work on a lot of development deals in NC representing developers and builders.  On deals where I represent the developer, Lennar is often on the other side.  For a deal this size, the assignment fee sounds relatively low, if you have so much upside and the assignor has added so much value.  FWIW, I am seeing developers in NC take on these types of deals.  18 month entitlement periods are not uncommon in several jurisdictions.  My experience working with national builders like Lennar has been the best and worst of times.  They have the capital and expertise to make stuff happen when they want to but also  the financial strength to absorb a loss when they need to get out and the intestinal fortitude to retrade deal terms when they deem it necessary.  I would really like to hear updates as this deal progresses.  From a transactional and legal standpoint, I find this type of deal fascinating.

You will need a securities attorney to walk you through the ins and outs of structuring a syndication.  A good commercial mortgage broker can present you an array of debt financing options.  On actually procuring funding from investors, there are several BP podcasts to discuss that topic in more depth.  FWIW, 20+ investors on one deal is a lot of people and relationships to manage, not to mention financials to prepare.  

Absolutely get legal counsel. You need to know how the "waterfall" works with respect to distributions to you and the other partners, what liabilities you have for any debts the LLC incurs, what obligations you have, when and how financial information is provided, how key decisions are made by members, management authority and who has it and what it entails, how and when managers can be removed, hold periods for your investment, how additional capital calls work, etc. etc. etc. Now is the time to iron out these details.

Check out "A Student of the Real Estate Game" website at

http://astudentoftherealestategame.com/. It has a ton of information on starting a CRE career. It is a great resource.

Derek Perez if your partner is providing all the equity, your partner is taking the bulk of the risk. The structure should reflect that risk allocation. There are almost infinite structures you can use, but at a high level I would suggest at least a 8% preferred return to your partner and then at least a 75/25 split (75% to you partner and 25% to you) after that preferred return is paid. You may be able to get some type of acquisition fee related to the purchase, perhaps an ongoing management fee (to "manage the managers") while you own it and a disposition fee upon a successful sale.

You can identify multiple potential replacement properties in different asset classes as part of a 1031 exchange...you do not have to purchase them all but you do have to identify them within your 45 day window.  There are also investment groups and brokers that focus on helping buyers that need 1031 replacement properties - a few inquires on BP will likely yield result for people who can assist you.  

Residential brokers sell finished product on the back end of a development and typically are not involved with the initial acquisition and financing of the land, the entitlement process, or the construction of improvements. Commercial brokers are involved on the front end of a development and typically are out of the picture on the sale of individual homes/townhomes/condos to end users on the back end.

@Elan Spreiser Where are these properties located?

Yes. There are a host of issues that can arise if individual members of the LLC want to get their money out or object to the 1031, but there are strategies to address those situations.

I am a commercial real estate attorney and deal with commercial leases regularly. Consult with your attorney but I would expect your lease provides that tenant is in default for late payment, triggering numerous default options (acceleration of outstanding rent owed, right to evict, etc.) for you as LL. Determine what options you have and develop a game plan before you contact the tenant - you should be in a position of tremendous strength. Leverage it.