Valuing LP position mid-project?
How do you value a mid-project partner take out?
LP wants to be taken out post construction but pre lease up. How would you value their position. Would it be okay just to assume whatever there basis was, plus a, say, 10% profit on cost?
Really needs to be a discounted cash flow valuation.... project the cashflows/terminal values of the LP interest to completion, then discount back to today's value at some appropriate risk determined rate. Not an easy assignment, lots of assumptions, but that is the deal.
If they are "needing" to get out, one could "exploit" the situation... as many secondary market buyers of LP interests want to do... your call on how to treat a partner. The illiquid nature of the deal does relate to a real discount potentially, and cost of capital of the buyer (which may be the sponsor in your setup), is a factor... all this would set the "discount rate' in the DCF.
If they would be happy with basis + 10% and you think a fair deal with some upside a buyer, may be fair/simple way to do.
I wonder if thats how it went down here: https://renx.ca/marlin-spring-replace-boardwalk-riocan-jv-condo-develop…
Anyone know word on the block?
No idea about this deal, but it the sale is strategic (i.e. not out of a pure default or insolvency situation), the price would need to be "fair" an some process like the DCF I described likely occurred. To be clear, these are going to be heavily negotiated deals, you can bet each side will come with a methodology that supports their respective positions.
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