Ackman-Ziff Real Estate Group LLC

So You Want to Buy Out Your Capital Partner, What’s the Right Strategy?

Renewed interest in equity recapitalizations is emerging as sponsors across the country find themselves facing a similar dilemma: while existing capital partners are ready to exit after full or partial execution of the original business plan, many sponsors still see the potential to realize significant returns (through an additional value-add plan or perhaps simply preserving an attractive tax basis) and have a vested interest in owning their properties long term. To get the best of both worlds, sponsors are increasingly seeking to buy out their existing partners through equity recapitalizations.

The groundwork for a successful recapitalization transaction starts long before speaking to any new prospective investors. Sponsors, ideally with guidance from Ackman-Ziff, must first assess the feasibility of a recap based on asset quality, local market conditions, and current capital partner expectations. Due to the multiple parties and potential outcomes, negotiating and structuring these favorable yet complex transactions is often more art than science.

If your existing capital partner is looking to exit and you’re considering an equity recap, schedule a time with us to discuss the appropriate next steps. The team at Ackman Ziff provides clients with the guidance and current market insight necessary to successfully navigate the nuances of these uniquely complex transactions.

To learn more about the characteristics of high-quality recap opportunities and some of the early hurdles sponsors face (and should avoid), contact Ackman-Ziff for further information.