The Paul Milstein Center for Real Estate hosted a daylong seminar on negotiating real estate joint-venture agreements at the School on Friday, November 15. Organized in conjunction with the MIT Center for Real Estate, the event allowed more than 60 graduate real estate students from Columbia, MIT, and Harvard to understand the most important provisions in joint ventures (agreements between parties to share the profits and losses of a real estate project) from some of the top legal and business minds in the field — and then to try to negotiate those provisions themselves.
In introducing the event, Professor Jennifer Morgan said that now is a particularly pertinent time for students to learn about the subject, as joint ventures are currently popular among investors given the volatility of large funds during the financial crisis. “Joint ventures give investors direct access to particular assets,” Morgan said. “They get more control but without having to provide staff.”
Morgan and Tod McGrath ’84, lecturer and chairman of the advisory board at the MIT Center for Real Estate, detailed some of the important issues two sides face in coming to terms on this type of deal, including who contributes how much money and when, how to split the profits and cover any potential losses, and exit strategies. “I like to think of it as, ‘What are we going to do when we want to break up?’” Morgan said.
Following the morning talks, students were divided into four negotiating teams (two as developers and two as money partners) to deliberate on the specific terms for a joint venture on a hypothetical $100 million mixed-use development. They were advised by attorneys from AIG Global Real Estate; DLA Piper; Fried, Frank, Harris, Shriver & Jacobson; and Goodwin Procter. Those private breakout sessions then culminated in two parallel negotiations, judged by over a dozen prominent industry experts. The day concluded with a networking reception at the School.