Selling partial ownership share in $100m mixed use
Does anyone have experience selling partial ownership? I'm owner in a family group and I'm looking for a way to sell my shares (7% of the building). I have no idea if this is viable, how to do it, or the penalty I'd pay for selling a partial share where the new owner would have no control. I'd love any advice!
[{"id": "h9qgxh9", "text": "I\u2019ll buy in if valuation and cash flow dividend supports it.", "replies": [{"id": "h9qtn20", "text": "I\u2019m interested to purchase too", "replies": [], "depth": 2}], "depth": 1}, {"id": "h9qjrn3", "text": "Can ask other owners if they want to buy, then put it on the market.", "replies": [], "depth": 1}, {"id": "h9qjvso", "text": "Hi there! \n\nWe have been buying passive investors out of commercial real estate syndications for years. \n\nWe also provide short term loans secured by illiquid ownership interests to those who do not want to sell their stake but are in need of immediate liquidity (hence our name). \n\nThe first thing you will want to do is review your operating agreement to see if you are legally allowed to sell your ownership interest. In many cases, you will need the managing members consent. \n\nIf you are allowed to sell your interest, we would be happy to sign a non-disclosure agreement and review the property financials and rent roll to determine what your 7% stake is worth and present you with an all-cash offer.\n\nOur offer will be a discount from fair market value due to the illiquidity and non-control. This discount will vary greatly depending on the strength of the real estate and the returns. \n\nPlease do not hesitate to reach out with any other questions.", "replies": [{"id": "h9qogj2", "text": "It\u2019s been a while since you\u2019ve posted good to see you again", "replies": [{"id": "h9r3hsn", "text": "Thank you very much! To be honest, we are long-time lurkers.", "replies": [], "depth": 3}], "depth": 2}, {"id": "h9qx2mc", "text": "Thanks! The agreement looks like I might need consent although another clause may overrule that based on the small size of the share. I'll have to have a legal review. If for some reason I am not approved to sell now, can I force my way out of it when it comes time to refinance? Can I be forced into taking on another loan if I don't want to be involved? Is it possible to be trapped for life in this?", "replies": [{"id": "h9r1uda", "text": "We are happy to review the operating agreement for you and share our opinion.\n\nWe have had a lot of success with obtaining consent from the managing members. \n\nMost operating agreements give the sole right to refinance or sell the property to the managing member. That being said, every operating agreement can be different. \n\nWhile a manager can not require that you personally guarantee the loan, they may have the right to keep refinancing the property and holding it indefinitely.\n\nIn the past, we have acquired ownership interests in syndications that were over forty years old. In some cases, the seller was an inheritance, who received the ownership interest when their parents passed away.", "replies": [], "depth": 3}], "depth": 2}, {"id": "h9rko3z", "text": "Wow, that\u2019s a sick niche you guys carved out. Well done.", "replies": [{"id": "h9sv1rq", "text": "Thank you very much. We've found that there are a ton of asset rich but liquidity poor  investors out there. They might have a $20 million balance sheet but sometimes it will all be tied up in their different investments. When they need to access immediate cash, they can turn to us to unlock their trapped equity.", "replies": [], "depth": 3}], "depth": 2}, {"id": "h9skjjx", "text": "I was just going to refer OP to QL...Then I saw the post. You can't go wrong with them if it works. Also, there really is no market for LP secondaries so I'd seriously consider any offer that comes through from them.", "replies": [{"id": "h9sv69k", "text": "Thank you so much! Out of curiosity, how did you first hear about our company?", "replies": [], "depth": 3}], "depth": 2}, {"id": "h9z4ytn", "text": "My company does a very similar thing if you wanted a second opinion. I\u2019d be very interested if you had a Multifamily component to if", "replies": [{"id": "ha0y0i3", "text": "I'd love to connect too. We are always open to working with other firms in the industry.", "replies": [{"id": "ha16ko6", "text": "Shoot me a DM and I\u2019ll give you my email. (Sorry I don\u2019t even know how to send a DM)", "replies": [{"id": "ha170cs", "text": "Sent. Thanks!", "replies": [], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "h9qri30", "text": "For 7% I would think the other owners would want to buy you out. If not, you're not going to get a valuation of 7% of the appraiser value  because you're asking someone to jump into bed with people they don't know. Having said that, a $100m property is hopefully run professionally and could be sold like a commodity.", "replies": [{"id": "h9qxnsi", "text": "Thanks for this perspective--it's very helpful. I hadn't thought about it working more like a commodity because of the scale, but that makes sense. It's definitely run professionally with high caliber property managers. I always hear about having to take a 40%+ hit to the value because the buyer would have to jump in with unknown people, but the operation is not volatile at all. A major US company owns a huge chunk of it.", "replies": [{"id": "h9qya9m", "text": "Yeah. A smaller property would definitely succumb to the big hit on value, but I think in your case it shouldn't be that bad. So you're talking about approx $7mm for your part? I'd be willing to take a look if you or your rep wants to DM me. I would still look internal to the other owners first though.", "replies": [{"id": "h9r33zj", "text": "The seller needs to review his operating agreement thoroughly to determine if they are actually entitled to 7% of the proceeds at a liquidity event (i.e. sale or refinance). \n\nIn some syndications, there is something called a waterfall that creates an uneven distribution. Usually how it works is the passive investor receives a certain preferred return (i.e. 8% annually) on their original capital contribution. Then, once the investors capital contribution is returned, the remaining profits are split according to a waterfall. In example a \"60/40\" waterfall, where the passive investor only receives 40% of the profit and the remaining 60% goes to the managing member.", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}, {"id": "h9sg5ga", "text": "Yeah, co-owners are by far the most likely buyers of your shares - they are already familiar with the property and at least one of them has control as well. Then you are just negotiating over a fair price.", "replies": [], "depth": 2}], "depth": 1}, {"id": "h9qthwq", "text": "Need to read your OA. They typically have provisions that outline any initial hoops you need to jump through.", "replies": [], "depth": 1}, {"id": "h9sp1eq", "text": "We tend to structure some investments like this with our family business. I would suggest you look into the way the partnership is structured. Are you tenants in common etc.? I only ask because a lot of times you have to go through a certain process when you want to sell. Like for instance you give the existing partnerships the right of first refusal/offer etc. before you can take it to the general open market. Additionally even if your partners turned down the purchase they can still hold up the sale because they want to be comfortable with who is brought in. Sometimes it\u2019s just not as cut and dry as being able to throw a for sale sign up. Would defer to your attorney.", "replies": [{"id": "h9svov1", "text": "This is a great point regarding the right of first refusal. Usually though, the way ROFR's work is you have to find a 3rd party (i.e. QuickLiquidity) to make a qualified offer to purchase your ownership interest and then the other investors in the syndication have the right to match that offer and buy it from you instead. If they do not match the offer, you then have the right to sell it to the 3rd party purchaser.", "replies": [{"id": "h9udjov", "text": "Yes, this is how our agreement is structured. There are a set number of days the other owners have to consider the offer (I believe 15). If there are no takers, a new buyer can then come in as a non-voting owner.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}]