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PERE Insights – Relationship problems? Partner defaults and other termination rights under programmatic real estate joint ventures

In the first Alert of two on programmatic joint ventures in European real estate investment, we focused on some key provisions which are designed to establish relationship harmony and alignment between the capital partner and the operating partner. However, market conditions, business conflicts and human nature can all operate to upset the intended balance of interests and one party or another can therefore fail to meet expectations required of it. It is critically important that joint venture agreements provide for resolving disputes which arise as a result and, ideally, for an equitable parting of ways under the circumstances. Setting out a clear position from the outset on defaults and failure in performance is also another way of creating alignment. The key is balancing a sensible amount of management flexibility with necessary checks and balances, thereby promoting the best interests of the venture. This alert focuses on some specific provisions which are designed to achieve that balance and on the rights which are consequently available to the performing party where standards are not met. It also written assuming, again, that the capital partner is providing the significant majority of the venture’s equity commitment and is negotiating with a view to best protecting its investment, whilst also taking into important practical and relationship considerations. Continue

Ropes & Gray attorneys regularly provide insightful perspective on key legal issues.To read more, visit our Alerts archive.

PERE Insights – Relationship problems? Partner defaults and other termination rights under programmatic real estate joint ventures

In the first Alert of two on programmatic joint ventures in European real estate investment, we focused on some key provisions which are designed to establish relationship harmony and alignment between the capital partner and the operating partner. However, market conditions, business conflicts and human nature can all operate to upset the intended balance of interests and one party or another can therefore fail to meet expectations required of it. It is critically important that joint venture agreements provide for resolving disputes which arise as a result and, ideally, for an equitable parting of ways under the circumstances. Setting out a clear position from the outset on defaults and failure in performance is also another way of creating alignment. The key is balancing a sensible amount of management flexibility with necessary checks and balances, thereby promoting the best interests of the venture. This alert focuses on some specific provisions which are designed to achieve that balance and on the rights which are consequently available to the performing party where standards are not met. It also written assuming, again, that the capital partner is providing the significant majority of the venture’s equity commitment and is negotiating with a view to best protecting its investment, whilst also taking into important practical and relationship considerations. Continue

Ropes & Gray attorneys regularly provide insightful perspective on key legal issues.To read more, visit our Alerts archive.

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