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By Alex Cemaj ’17 and Will Noyes ’17
On Friday, November 18th, graduate students from the Real Estate programs at Columbia, MIT, and NYU gathered in Uris Hall for the 5th annual Coming to Terms: Negotiating Real Estate Joint Ventures workshop. The event which is co-sponsored by the Paul Milstein Center for Real Estate, the MIT Center for Real Estate, the Columbia Graduate School of Architecture, Planning and Preservation, and Grosvenor, provided students from each of the different programs the opportunity to spend a full day discussing key issues in a real estate joint-venture (JV) agreement and to engage with seasoned professionals from both the legal and business sides of the real estate industry.
The participating students were broken out into teams and each assigned a professional counsel. Together they prepared for a live joint-venture negotiation, which was presented before a panel of “celebrity” judges from the real estate industry. At least six students from each side of the JV had the opportunity to negotiate detailed structures of the agreement with members of the opposite team, with their legal counsel offering guidance intermittently.
After welcome remarks and morning coffee, the event kicked off with Jennifer Morgan, Partner at King & Spalding and Adjunct Professor at Columbia Business School, and Tod McGrath ’84, Vice President at Boston Properties and Lecturer at the MIT Center for Real Estate. The initial conversation was geared around a case study involving a real JV which had not gone well in the Seaport District of Boston, where the parties ended up in court. It was stressed throughout the day that JV negotiations are a crucial step in the process, and attention to detail is essential. Tod and Jennifer then discussed the riverfront development project that would be the focus of the joint venture agreement, each playing the role of either the Managing Member (developer) or Investor Member (equity partner), with their dialogue highlighting some of the key business objectives and issues that would surface during the negotiations later that day.
When the case introduction was complete, the large group broke into six negotiating teams comprised of students from different schools and varying professional backgrounds; three students to represent the Managing Member and three to represent the Investor Member. As the teams prepared for the mock live negotiations, they were advised by attorneys from prestigious law firms such as Goodwin Proctor, AIG Global Real Estate, DLA Piper, Akerman, Fried Frank, King & Spalding, Boston Properties, and Goulston & Storrs. The attorneys were instrumental in guiding students on key negotiating provisions within the documents, including but not limited to waterfall splits, fee negotiations, voting rights, and exit events.
After the four-hour preparation period, teams of Managing Members and Investing Members were paired up to negotiate their respective portions of the joint-venture agreement. Beginning with the financial structure of the joint venture, each side had an opportunity to not only propose their ideal structure, but to also explain their reasoning in an effort to persuade the other side.
Once the teams worked their way down the term sheet, the judges (representing firms such as Grosvenor, Boston Properties, Related, and JP Morgan) offered their feedback on the performance and suggested tactic or items they would have included or excluded in the discussions.
The day came to a close with a cocktail party and networking reception where students and professionals were able to mingle and discuss the successes of the day. “The event was an incredible opportunity to learn in a hands-on manner from industry leaders from a legal and a real estate practitioner standpoint. The feedback we received during the live negotiation was so valuable as it came from the GP, LP, opportunistic and long-term hold perspectives. If I learned anything it was that the terms you are focused on depends greatly on where you are sitting at the table,” said Morgan Mann ’17.
Alex Cemaj ’17 is the VP of Careers and Will Noyes ’17 VP of Finance for the Real Estate Association.