SALE OF LP INTEREST OR REAL ESTATE
A sponsor has the option to purchase the limited partner interest rather than purchase the real estate. This opportunity and purchase price formula may be detailed in the limited partnership agreement or may be discussed during the purchase proposal process.
After purchasing the limited partner’s interest, the sponsor gains 100 percent control of the limited partnership. As a result, the limited partnership is not terminated in the same way it is when an underlying project is purchased.
We urge sponsors to seek legal counsel regarding the decision to purchase the limited partner interest versus the real estate. Here are some of the issues to consider.
- The real estate purchase may involve numerous costs, including transfer taxes, if applicable, and typical transaction costs, such as title and recording costs. Some of these costs may not apply when purchasing the limited partner interest.
- If the sponsor plans to resyndicate the project either immediately or in the future, the new ownership must be properly structured to ensure the eligibility for acquisition tax credits