How big a premium to convert to equity instead of taking cash in a sale?
Have been presented an offer from a bigger developer on a property of mine that they intend to redevelop alongside some neighboring properties which they would also acquire. The development they're proposing is above my pay grade, so I can't do it myself. I might like to go along for the ride though, so I was thinking about proposing to convert my 'sale' into equity in their project. Since I'm reducing their cash outlay I thought it reasonable to ask for a premium e.g. if they offered me $1 million for my place, ask for $1.25 million in equity. 

Any thoughts on what % premium is reasonable? It's in an Opportunity Zone if that matters.

And, if I do this, beyond asking for MFN terms with any/all other equity (including their own in-house $) is there anything else I ought to ask for?
[{"id": "f4o1a5z", "text": "I think 25% is good. There are going to be plenty who say there is no right answer. Make sure you can live without the money for 5 years.", "replies": [], "depth": 1}, {"id": "f4o40xe", "text": "As with most equity deals, there are a million ways to structure this, but some things to think about:\n\nWhat is your opportunity cost for not investing with them, meaning what would be the best investment for that $1MM if you don't invest into their equity position?  8% in an ETF?  18% IRR in another RE deal as an LP?  What are your returns if you hold the property?  Keep in mind the Opportunity zone not only lets you defer your gains going in, but also going out.  That could save you a large chunk in capital gains right there.\n\nDo they need your investment, or are you potentially pushing out one or more of their regular investors out of a deal?  Will their deal still work without your property?  \n\nIn my experience, a typical finder/broker fee for equity is around 2-3%.  Look at the GP returns vs. what they're offing you.  If they're offering you a good deal, no reason to squeeze them\n\n&amp;#x200B;\n\nAs far as what to ask for, they should be willing to open their books if you're investing with them as an equity partner.  Get their full PPM, underwriting, return projections, proforma, etc.", "replies": [], "depth": 1}, {"id": "f4o5kna", "text": "As a developer I wouldn't give you a premium. The upside for you is that you're getting a return on that money. You should ask for preferred returns like your an equity investor. Something like 8% on your input (fair market value of the land) plus a percentage split of the returns.", "replies": [], "depth": 1}, {"id": "f4ocr01", "text": "Devil is in the details! $1M valuation with a 10% pref, accruing and compounding, could be worth more than $1.25M under other terms. \n\nYou need to believe strongly in\n-The Developer (and his propensity for fairness)\n-The Structure of the deal (waterfall / JV terms, financing and debt levels) \n-The Development and Location \n-Capital Markets being similar or better at exit\n\nOtherwise the bird in the hand is worth two in the bush, and you should take all your sale in cold hard cash money. As the famous Lil Wayne said \u201cCash Money Baby\u201d.", "replies": [{"id": "f4olt4c", "text": "Come on, he's a real e a Tate developer, you can totally trust him to not screw you sideways. /s", "replies": [], "depth": 2}], "depth": 1}, {"id": "f4ofj41", "text": "It's usually not a premium dollar value up front, but rather a rate of return on your investment in the development. There are many ways to structure it beyond that.", "replies": [], "depth": 1}, {"id": "f4orf42", "text": "I think you\u2019re on point. Also, with existing oz property, you can be up to 20% in a deal with your land/property value as equity.", "replies": [], "depth": 1}, {"id": "f4os4nf", "text": "They probably already have funding secured via a PE fund if they're at this stage of the process..so it's unlikely they're going to pay you a 25% premium when they are using somebody else's cash anyway to pay you out and that cash comes at a 0% premium. \n\nAsk them if they're interested in keeping the cash and giving you equity, but dont give them a price yet. If they're interested in giving up equity, then ask them for their financial model and see if the IRR is worth it for you or you could park that money elsewhere. Look at their revenues, costs, waterfall models to see if it makes sense or if the terms are favorable.", "replies": [], "depth": 1}, {"id": "f4owcex", "text": "Developer here. Get this proposal from sellers often. I never do it, no longer even consider it. Makes no sense since we don't need capital, since the seller believes their money is worth more than someone else's, don't need to or want to learn new partners, negotiate new structures etc. Plus, as DJ Khaled says, no new friends. Take your money and go do another deal. Good luck", "replies": [], "depth": 1}, {"id": "f4p2axp", "text": "I think you should be thinking about whether you would invest in the project if you didn\u2019t own part of the assembly? Meaning do you believe in the developer?\n\nI wouldn\u2019t contribute the land until the developer has all entitlements/ construction financing, as things can go south in the meantime. \n\nYou can agree to contribute the land at today\u2019s agreed upon price, and begin accruing interest and get a piece of the promote upon exit. \n\nMake sure they are taking market fees for their work.", "replies": [], "depth": 1}, {"id": "f4prb8j", "text": "In addition to the other comments here, check if this is for an opportunity zone fund. If so, they will not be liquidating for 10 years to take advantage of the tax benefits. You will also need to consult an attorney to make sure you are taking advantage of those as well.", "replies": [], "depth": 1}]