How do you sell commercial property LLC membership interests to a strategic investor?
For example, you own a substantial membership interest in a single asset LLC for a commercial property.

If you want to sell your stake to a large strategic investor who can take the property to a new level... is this a fairly straightforward process?  Legal wise the main thing is to develop the PPM for the transaction? 
[{"id": "fvri65j", "text": "I'm not an attorney... legal wise, it's important to check your subscription agreement, your loan agreement, any JV agreement you might have, and any other agreement that might pertain to the financial success of the property. Many of them, particularly the sub, loan, and JV docs, will have specific regulations around what transfers of equity are allowed and how they need to be conducted.", "replies": [{"id": "fvrnfn5", "text": "Thanks.  In cases where the other owners are on board with the new buyer/owner, it seems to make it a lot smoother and easier.  But definitely can see some problems if not all are on the same page", "replies": [], "depth": 2}], "depth": 1}, {"id": "fvridvi", "text": "I'm also curious about this, and if the sale of an LLC (in part of whole) would lead to a change of title or any kind of record change at the property level.", "replies": [{"id": "fvrkjo4", "text": "If you\u2019re appropriately structured it shouldn\u2019t, the property should be owned by a propco which is 100% owned by an upper tier blocker holdco which has subordinate interests for the investors. The propco would still hold the deed and a municipality wouldn\u2019t have the ability to look up-structure, but a lender might have an issue with it (and likely has transfer approval rights anyways)", "replies": [{"id": "fvrlbim", "text": "Right - that all makes sense, I think I was misunderstanding the importance of the holdco. Thanks!", "replies": [], "depth": 3}], "depth": 2}, {"id": "fvslvv4", "text": "It depends on the jurisdiction.  Some states, primarily to prevent transfer tax avoidance, treat it as such (even though the fee owner of record doesn't change).  As a related point, because the entity stays the same you have to carefully craft your reps and warranties and indemnity provisions.  As a buyer the last thing you want is to pick up the existing corporate liabilities that you wouldn't ordinarily assume in a standard dirt purchase.  I use a hybrid Real Estate PSA/APA.", "replies": [{"id": "fvstx1u", "text": "Depends on how much of the blocker gets transferred. If it\u2019s a minority share doesn\u2019t matter, if you\u2019re doing like a drop and swap for the entire thing they\u2019ll likely figure it out and whack you on next tax assessment.", "replies": [{"id": "fvteyur", "text": "Minority interest, I agree.", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "fvrktuq", "text": "Attorney here - maybe I'm biased but there is no reason a non attorney should be doing this themselves. Spend some money on us transactional lawyers now and save a lot on the litigation that won't happen because you called a lawyer.", "replies": [{"id": "fvrn0jc", "text": "Agree for sure.  Definitely need an attorney to help plan it out and do the PPM", "replies": [{"id": "fvs9odr", "text": "you just sell 100% or whatever to the buyer.  Loans might become due on sale, and some juriidictions will tax it as a sale depending on how much is sold (considered a transfer).  Get an attorney.", "replies": [{"id": "fvsl205", "text": "Also a transactional attorney.  I help clients with these all the time.  They can be fraught with pitfalls.  As others have said, proper legal advice is a wise spend here.", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}, {"id": "fvrwlud", "text": "Non-attorney here who agrees entirely -- too much at stake that can be covered with a nominal investment in legal services.", "replies": [], "depth": 2}], "depth": 1}, {"id": "fvrl8gv", "text": "It sounds like you just want to swap members of an LLC. In that case you just need to update the operating agreement and any other legal documents that are associated with and previous ownership interests in the LLC. You can do this with people or another LLC that might have an ownership interest. I forget the exact name but your attorney will have you sign an Assignment and Assumption of Membership Interest. This transfers ownership to the new investor", "replies": [{"id": "fvrn7hl", "text": "Great thanks.", "replies": [], "depth": 2}], "depth": 1}, {"id": "fvry3yk", "text": "&gt; If you want to sell your stake to a large strategic investor who can take the property to a new level... is this a fairly straightforward process? \n\nYes? \n\nThe relevant analogy might be selling someone land. Strictly speaking, all you need is a deed. Customarily speaking, there's a lot that goes on otherwise, based on where you are and what the relationship with the parties is and a thousand other considerations. Here you just need an assignment of interest, even simpler than a deed. But you need to ask about the operating agreement, and the lender, and taxability and tax consequences at the various levels, and so on, and all that can produce other paperwork and so on.", "replies": [{"id": "fvs6ecf", "text": "Great Thanks.  I think my main concern was legally being able to market the membership interests being sold without violating any SEC rules.  \n\nI know it gets sticky with accredited investors and the PPM.", "replies": [{"id": "fvs9ujz", "text": "I have an LLC PPM if you want it. PM me your email.  Depending on how many accredited or non-accredited investors you are selling to, it will determine what kind of reg d you're doing.  How big is this deal?", "replies": [{"id": "fvszhwy", "text": "Thanks, its all early stages though, and not really any certainties or specifics.  I'm just trying to plan out and visualize early on how exit strategies might look", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "fvsanzz", "text": "You negotiate the economic terms with the buyer/seller (with or without a broker).  Then you call a lawyer.  Trade some paper and it's done.  Similar to a real estate transaction, except the legalese is different. \n\nI think you need to figure out what to do with potential existing legal liabilities and claims, etc. since you're buying the entity and you're accountable for them, so you, the other party, and your lawyers need to decide how to handle those. If you're buying only a partial interest, you also need to negotiate the joint venture terms.", "replies": [], "depth": 1}, {"id": "fw4jbmi", "text": "Are these LP interests or GP side? If GP, are you a guarantor on the loan and need to replace yourself with another suitable guarantor?\n\nIf LP, did you originally purchase your interests via a PPM and subscription process? An SEC Atty could tell you better since I'm not an Atty but it seems you should be able to sell your units while presenting the original PPM. The operating agreement should spell out how LP interests should be sold. So GPs mandate ROFR in the entity docs so they don't have to bring on an unknown party. \n\nAlso, I have my doubts that you are a promoter/sponsor managing a deal that needs a PPM since you'll be selling your interests outright.\n\nDM me if you like, I have a few SEC Atty recommendations that might help.", "replies": [{"id": "fw4yj53", "text": "I am not currently a sponsor/promotor but I am looking into a deal to partner with a developer to get a project done, and will be raising equity capital from investors.  I am just trying to plan ahead with an end sale in mind.  \n\nIdeally a full sale of the asset eventually after a few years, with all on board to sell, but in the case that there are investors that want to sell earlier versus later, I am trying to understand if they can easily just sell their interests to someone else (if not current GP/LPs) - as long as that new buyer is agreed upon by all parties.  To initially buy into the deal, investors would be signing the PPM subscription agreement to buy interests.", "replies": [{"id": "fw7w6s4", "text": "Gotcha...There is no real secondary market for the sale of real estate LP units although I do know of one direct investor that will purchase LP secondaries but typically a a great discount, like $.60 on the dollar. Valuation can be an issue as well.\n\nGP side is more difficult to swap interests because of the loan guarantor aspects I dicussed above and issues surrounding management and governance. Most GOs I know would not like someone trying to sell their GP units to a 3rd party and will usually want to buy them out or convert their interests into more passive type GP interests with zero voting or governance rights.\n\nIf its a development deal there are two additional ways to recalitalize and payoff investors via the perm loan take out, if cash is pulled from the refinance and a supplemental, mezz or pref recapitalization after stabilization.\n\nNone of my business but if you are looking to simply raise capital for a deal in exchange for some sort of fee or equity based on the amount raised, I'd be very careful. Lots of activity in syndication circles (and SEC actions) regarding this. Best to talk to an SEC attorney on how you can do this legally. Good luck!", "replies": [{"id": "fw9y9vg", "text": "Thanks.  I am still understanding the legal aspects of it all, and being careful, but it is more than just raising capital and expecting a commission/fee.  Not planning to be a broker/dealer and earn a percentage of funds raised. I plan to be involved with the business consulting and marketing side to make sure the project is successful throughout a few year span.  It may be structured as a strategic partnership or joint venture.", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}]