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- December 2010: Vol. 22 No. 11

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Money Talks: Investors Regain the Upper Hand in Negotiations

by Amy Wells, John Kuhl, and Erica Bose

During the prior market run-up, operating partners in real estate joint ventures enjoyed a great deal of leverage in document negotiations. The imbalance was partially due to the number of equity investors seeking quality operating partners. With the market reversal, the leverage pendulum in negotiations between equity investors and operating partners in real estate development joint ventures has swung in the investors’ favor. With a diminished availability of capital, competition among operating partners for equity investors has increased. While the bargaining positions of the parties still vary based on factors such as the reputation of the operating partner, the desirability of the real estate, the anticipated duration of the venture and the relationship — or lack thereof — between the operating partner and the investor, in general, the shift in the economic climate has given investors the upper hand when negotiating the terms of joint venture agreements. The

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