If you are a Limited Partner in a Syndication project, and need to sell your shares early to another Limited Partner or a GP, what is a ballpark for how much of a discount they will get?
For example if you own equity in a RE syndication and the hold time is 5-7 years, but you need to get your cash out in year 3, then there is a chance (but no guarantee) that another LP or the GP will buy the shares from you, however they will buy them for a discount/deal.

Is there any common range that this would be? How much of a loss compared to the initial amount you invested?
[{"id": "hmu15t4", "text": "Too many factors need to be considered and it really depends on the performance of the investment. Equity recaps are common. If the asset is performing well, then no reason why LP can\u2019t recap their full basis at no discount. This is very situational, and no general guideline exists from my experience", "replies": [], "depth": 1}, {"id": "hmu307b", "text": "Obviously a lot depends on how the deal is performing, so that's the main variable we'd need to know to give a full answer. If it's underperforming proforma then your 100k basis might only be worth 80k. If that's the case, I doubt anyone would want to buy it without a significant discount because the project is already doing poorly, so the risk is high. \n\nAssuming things are going ok though, I've heard of people in this exact scenario selling their share for the full basis. Generally, this is still a discount for the buyer because theoretically the property has appreciated since takeover. So if your basis is 100k, it would be attractive to a buyer to put another 100k into a project that they know is performing in terms of cashflow and NOI, so they can expect to sell in another 2-4 years for 150k or whatever. In fact, using this scenario, it might not be unreasonable to sell for a small profit (110-115k) since the risk of the unknown is not really a factor for the buyer.", "replies": [], "depth": 1}, {"id": "hmu7i9h", "text": "Our company purchases (and provides loans against) illiquid ownership interests in commercial real estate syndications. \n\nFrom our experience, limited partnership interests on the secondary market are only worth what someone is willing to for them.\n\nWhile many people might say that a 30% discount from fair market value is a \"fair\" discount for the lack of liquidity and control, the truth is the discount should vary on every single deal depending on the risks and returns of that specific syndication. \n\nFor example, a multifamily syndication that has a Fannie Mae loan at a 3.25% interest rate with 5 years of interest-only will provide significantly better cash-flow to its investors than an office building syndication that has a bank loan with no interest-only period and a 5% interest rate. From our point of view, we might require a larger discount on the office building vs the multifamily syndication.\n\nAnother example could be the type of profit sharing or waterfall agreement the limited partners agreed to. Let's say you have two single tenant net leased CVS with 15 year terms. The first syndication you receive a 6% preferred return and then 80% of the upside. The second syndication you receive a 5% preferred return with only 70% of the upside. You have the same exact real estate risk but your profit sharing with the syndicator on the second deal provides lower returns. \n\nAnother example is how transparent is the syndicator with due diligence? Do you receive quarterly reports with updated rent rolls and financials? If not, a larger discount might be warranted. \n\nOne of the ways we've helped limited partners save millions of dollars over the years is instead of purchasing their illiquid interest at a discount, is we simply provide them with a  loan secured by their ownership interest. This way they get the immediate liquidity without having to sell their stake. \n\nWe could probably write a book on all the different factors and ways you can calculate a discount but hopefully this provided some assistance to your question.", "replies": [{"id": "hmutjjj", "text": "So I\u2019ve never been in a syndicated deal but have been above them in the stack in pref positions on a bunch of stuff and have never had to deal with an LP transfer. That said do the sub dox typically have some sort of approved transfer provision or can an LP in a TIC typically transfer the interest to another party so long as they\u2019re an accredited investor? Presumably the structure is such that a transfer of interest from one of the TICs also wouldn\u2019t trigger any sort of transfer approval on the loan so long as the individual selling their interest isn\u2019t a control party?", "replies": [{"id": "hmxh4fj", "text": "Great question. From our experience, most operating agreements do have restrictions on a sale of an investors ownership interest. We normally see that the managing member's consent is required or that there is a right of first refusal. Which basically means that the other members of the syndication have the right to purchase your ownership interest at the same price that a qualified 3rd party buyer (i.e. QuickLiquidity) would.\n\nFor example, lets say you are an investor in a syndication and you come to us to sell your ownership interest. We would underwrite the property and issue a proposal. Let's say we are willing to purchase your interest for $1 million but your operating agreement calls for a right of first refusal. You would then have to show the other members of your syndication our proposal, and they then usually have 30 days to either buy your interest for the same $1 million, or if they don't you have the right to sell it to us. \n\nTo be honest, our biggest competitor is not any 3rd party company but the other investors of the syndication, especially the managing member.", "replies": [{"id": "hmxiz5h", "text": "Thanks for the response that makes sense. I\u2019d imagine that should help with price discovery, if it\u2019s a small secondary and someone is willing at too steep of a discount to NAV the MM would buy it since they have better knowledge of actual value. \n\nAnyways cool, I didn\u2019t know there was a market for secondaries for HNW interest in TICs", "replies": [{"id": "hmxk224", "text": "That is correct. We often find that the passive investor will first solicit an offer from their managing member and if it's at a steep discount, the seller will search for a 3rd party buyer. They would then find us and we would come in with a more competitive offer.\n\nIn a real life example, a managing member offered to buy our their investor for $5 million which was a significant discount from fair market value. Once the seller started working with us we came in with a higher offer and ultimately the managing member used his right of first refusal to purchase the sellers interest for $10 million. \n\nThanks to us, the seller doubled his sale proceeds.", "replies": [], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "hmul0fb", "text": "Reach out to the person who is syndicating the deal. I suspect they get asked this question all the time and could also give some general comments. To share with us.\nAs someone else commented earlier that equity purchase is also really depends on how the property is performing vs initial pro-forma.\nUltimately locked up funds should be the last source of funds to touch because there tends to be such a big penalty for trying to sell early. Essentially you are losing out on  at least 3 years worth of similar equity returns by selling early.", "replies": [], "depth": 1}, {"id": "hmzalm6", "text": "Have you looked the the pro forma partnership agreement?", "replies": [], "depth": 1}]