Property is located in California, development project whereby the LP is willing to take a discounted equity payoff (from GP) upon completion for 100% of their interest. GP would then own 100% of project.
LP is 60% of the total equity, I am assuming that in state of CA this would be treated like a sale in terms of the property needing to be reassessed? And also assuming that the lender (who is doing a construction to perm 10 year loan) may have something to say about the change in ownership? Anything else I might be missing that could cause issues in this type of partnership buyout scenario? LP did not sign on any guaranty or carve out for lender.
Aside from tax reassessment, watch out for transfer tax. This % can range but some cities are up to 5% now.
Need to check loan docs to understand limits to change in control. (Not tax advice speak with your lawyer) may be able to do an entity sale rather than property transaction so it doesn’t hit you on taxes.
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