David Warburg, Stanley Jutkowitz and Richard Crystal Published in AFIRE News
"Current Challenges Facing an Investor in a Real Estate Fund or Venture"

David Warburg, Stanley Jutkowitz and Richard Crystal's article, "Current Challenges Facing an Investor in a Real Estate Fund or Venture," was published in the September/October edition of The Association of Foreign Investors in Real Estate (AFIRE) News. According to their article, "In the current sobering and stressful U.S. real estate market, many equity investors need to determine their rights and obligations and identify legal, contractual and structural means to resolving pressing issues affecting their real estate-related investments." Their article identifies certain business issues which help define the current environment, discuss contractual, structural and legal factors, and touch upon possible solutions. The authors address both multi-investor funds and joint ventures.

After outlining the business issues that equity investors may face, the authors note that "Once the problems are identified, appropriate solutions can be evaluated and planned. Implementing one or more solutions will require reviewing existing documentation, considering how best to maintain or improve incentives for various parties (management, other investors, lenders) and alignment of interests, and analyzing tax consequence of such solutions.

The authors conclude, "Fund and venture investors in the current real estate environment must be informed, engaged and assertive. To the extent they are long-term investors with adequate time horizons, resources and patience, they may in fact harvest substantial long-term value from the current market environment. As regards new investment, it remains to be seen to what extent future real estate multi-investor fund and joint venture terms and structures will change materially from those in place prior to the recent crisis."