The posturing, the maneuvering, the negotiating and even outright backstabbing are unfortunately all part of the game. And while many would believe we are talking about Game of Thrones, we are undoubtedly talking about commercial real estate partnerships.
Mother of Dragons Partnership
Real estate partnerships are formed when two or more investors pool their money together to buy a real estate investment. Once the partnership is formed, one investor becomes the general partner who deals with the day-to-day operations and is ultimately the decision maker. Other investors are called limited partners, who are passive investors that have little to no say in the management of their investment.
In Game of Thrones, pooling resources and forming partnerships are the lynchpin on which success or failure hangs. In season 6, Yara and Theon Greyjoy arrive at Meereen and offer to provide Daenerys Targaryen one hundred ships if she in return helps Yara defeat her uncle Euron Grayjoy, and support Yara’s claim as the rightful Queen of the Iron Islands. Daenerys and Yara agree to pool their resources and form a modern era real estate partnership, but instead of buying Westeros and the Iron Islands using a commercial real estate broker, they sail across the Narrow Sea with thousands of Unsullied and Dothraki soldiers with plans of taking it by force.
The Night’s Watch’s Oath
The Night's Watch is a military order which holds and guards the Wall, requiring new members to swear an oath upon joining. The last sentence of the oath is “I pledge my life and honor to the Night's Watch, for this night and all the nights to come". When new members join the Night’s Watch, they stand together as sworn brothers, defending the Wall from white walkers and wildlings. But over time, diversion of interests occur between the sworn brothers on how the Night’s Watch is managed and run.
Real estate partnerships are not immune from diversions of interests between investors, whether caused by disagreements or an investors personal cash flow dilemma. Like the Night’s Watch though, investors will have a difficult time leaving their real estate partnership. Real estate partnerships have an oath that investors must swear by too, its called a partnership agreement. The selling of a limited partnership interest is dictated by the laws laid out in the partnership agreement, which can vary greatly.
When the sale of a limited partnership interest is allowed, there is a limited amount of buyers due to the asset being both illiquid and non-controlling. The shortage of buyers can adversely affect fair market value of limited partnership interest, causing limited partners to sell their positions at discounted to book value. Mark Cuban (March 4, 2015) said, “The only thing worse than a market with collapsing valuations is a market with no valuations and no liquidity”.
The Solution
When life presents unpredictable situations and liquidity is needed, limited partners can turn to the secondary market for potential buyers. Due to the risks involved with owning an illiquid and non-controlling asset, that can prove difficult.
However, where others see risk QuickLiquidity see’s opportunity. QuickLiquidity buys limited partnership interests in commercial real estate partnerships on the secondary market. We offer an exit strategy to limited partners looking to break free from their non-controlling and illiquid assets. We buy positions in stabilized and cash flowing partnerships on a nationwide basis in Limited Liability Companies (LLC's), Limited Partnerships (LP's), Limited Liability Partnerships (LLP's), Family Limited Partnerships (FLP's), Tenants-In-Common (TIC's), and Delaware Statutory Trust (DST's).
