We stopped by Ackman-Ziff, which last year arranged a dozen JV equity partnerships representing nearly $500M of equity raised (on top of $6B by year-end of pref equity/mezz/debt). Boston office managing director Adam Steinberg offered three tips on negotiating JV equity.
1) Be comprehensive right off the bat. To maximize bargaining power, push the equity source to include all the significant terms in the LOI. Too often sponsors push critical details to the contract phase (post-LOI) only to discover they don’t like something and can’t easily turn back having cut loose other potential backers.
2) Keep your options open. Maintain back-up choices for alternate partners. Gain bargaining power by ensuring your chosen investor knows it’s not the only interested party.
3) Educate yourself. Know the market and push for aggressive (but not inconceivable) terms.
Adam will be attending the NMHC Conference in Palm Springs Jan. 20-Jan. 22. For more JV Equity advice from our education partner, Ackman Ziff, click here.