All Forum Posts by: David Miller

Use a commercial real estate attorney...most standard form templates lack important terms and conditions. Commercial leases often govern a relationship over long periods of time which makes them one of the more complex documents to draft. A good attorney will save you money in the long run.

Ask the seller to accept a signed non-disclosure and confidentiality agreement related to any information the seller provides to buyer.

@Orin Orlopp I echo what @Kenneth Garrett said.  You can spend some money on an attorney now or you can spend a lot more money later if you have to clean up a mess.  Given especially this is your first deal, you "don't know what you don't know" and so there is value in having someone with expertise advise you. 

...on *my* profile.

If you are doing a commercial real estate deal, fee free to give me a call. See my contact information on your profile.

Are these residential or commercial properties?

There is return of capital and return on capital -- very different. Your proposed structure provides a return of capital before you get any "promote" fees. That is tough sledding (although I have heard some people do that). Consider doing a preferred return of X% to investors and then split the remaining profits with you getting your promote and the investors getting the remainder (perhaps via a 25/75 split - 25% to you and 75% to your investors). Both are a return on capital without any return of capital. Investors do. It mind this structure because if you are making money, they are making money above and beyond their preferred return. Give yourself the option but not the obligation to return their capital prior to a liquidity event (sale or cash-out refinance) with a minimum required hold period that allows you to (hopefully) stabilize the asset, increase NOI and build equity.

A few issues immediately come to mind: You need to know the owner actually owns the billboards and is not leasing them from another party (perhaps through a ground lease) and then subleasing to actual end users. Are there any easements over the underlying land for the benefit of the lessee? Can the lessee build more billboards or expand the existing billboard? Can they automatically extend their current lease term? Do the leases give the lessee any rights that restrict how you use or develop the land, i.e. any restrictions on new improvements that affect visibility? If necessary, can you relocate the billboards to another part of the property?

You likely need a joint venture agreement. If you are forming an entity in which you and your partners are members of the entity, you will need an agreement to govern that new entity. Either way, you will need to address similar issues (ownership, how profits/costs are allocated, what happens if things go wrong, how people can get out, etc).

Dave Foster is dead on. As described, there is no way to exchange this LLC interest (which is personal property) for a real estate interest. There are some ways to buyout members of a LLC prior to or after 1031 exchanges but the exchange of personal property interest for a real property interest is simply not "like kind" and thus disqualified. The documents the CPA is requesting may be helpful for auditing the requesting party's prior returns but at the end of the day the operating agreement controls the mechanism for the buyout process, which presumably includes how the membership interest is valued/appraised. Unless the requested documents are required or contemplated by the Operating agreement as part of the buyout process, there is probably no obligation to deliver them.