Partnerships in Commercial Development: Why You Should Be Wary and How You Can Mitigate the Risks

 Posted on December 00, 0000 in Commercial Real Estate

Commercial development projects are, by nature, risky endeavors. They are typically larger than residential projects, often require more funds, and have an added layer of complex regulations and requirements. When you add in a potential partnership, things can get even trickier. Learn why you should be wary of a partnership in commercial real estate development, and how you can mitigate against the risks if you decide to move forward.

Understanding the Unique Challenges of a Partnership

There might be a dozen or more sayings that justify a partnership (i.e. two heads are better than one), but they often downplay the unique challenges that one might face. For example, partners might take a synergy approach, only to realize that each member has grown or changed over the course of the partnership. Another potential challenge is the differing of opinions, morals, work ethic, and beliefs. Even more concerning is that this particular issue often emerges at the worst possible times – when speaking to the media, dealing with investors, or closing a deal.

Adding further to the challenges of a partnership is the volatile nature of commercial development. The market can be fickle, investment amounts are large, and when these two issues collide, it can create a sort of perfect storm. Sometimes, the situation can become so contentious that the partners spend several years in litigation, trying to sort out who owes what to whom. At the end of it all, both may walk away with significant financial losses and a soured relationship.

Mitigating Against the Risks

Probably the easiest way to avoid the risks of a partnership is to just not enter one. Of course, this may not be a possibility for everyone; sometimes a partner is needed to ensure all tasks are completed, or because more capital or credit is needed. In these situations, you can protect your portfolio by not engaging in a 50/50 partnership. Instead, be the one in charge of decision-making. Be the face of your own company. Lastly, never agree to something without first consulting a real estate attorney.

Contact Our Naperville Commercial Real Estate Lawyers

At Lindell & Tessitore, P.C., we make your best interests a top priority. Dedicated and experienced, our Naperville commercial real estate lawyers can examine the terms of a purchase or sale agreement, review partnership agreements, assist you in performing due diligence, and safeguard you from litigation over zoning and land use issues. Schedule your personalized consultation and ask how we can help with your next project. Call 630-778-3818 today.

Source:

http://www.nreionline.com/development/why-partnerships-commercial-development-are-destined-fail