Publications

- May 2009: Vol. 21 No. 5

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Making the Best of a Bad Situation: How Do I Offload a Disappointing Fund Investment?

by John Kuhl and Amy Wells

John Kuhl and Amy Wells, partners at law firm Cox Castle & Nicholson, answer this month’s reader’s question: “What are some options I can explore when faced with disappointing fund investments?”

The one-two punch of the financial crisis and economic recession have crippled many real estate investment funds, leaving the investors in those funds with many challenging issues. While it is not possible to summarize all options available to investors in a single article, and while these options may vary based on individual legal documents, we’ll discuss some of the general strategies that an investor may employ when confronted with a disappointing fund investment.

SECONDARY SALE

In a secondary sale, an existing investor in a private fund sells its interest to another investor. Secondary sales were already becoming more prevalent prior to the current economic and liquidity crisis for a variety of reasons. Some investor

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