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Assigning Roles in a Real Estate Partnerships to Avoid Conflict

With Percy Nikora, Co-Founder

Typically, when it comes to partnerships, you know, again, if you're pursuing something by yourself, there may be initial agreement that one partner is going to handle, let's say, majority of the construction-related work. Another partner may be doing the financing and the legal work and doing more of the leasing part of it. The reality is, that doesn't always work out exactly as intended. So as you're working through that particular project, you know, the amount of investment in terms of time commitment, for example, may vary by the partner, which throws off the initial agreement that you had. So, you know, and once that agreement is set, people obviously don't want to change their allocation of their percentages of profit.

So that becomes a difficult conversation to have with the folks, especially if you know them well. So in our scenario, for our funds, as well as for the syndications, we lay out the roles of the sponsor and that's why we make the sponsor essentially responsible for everything, right. At the end of the day, the buck stops with the sponsor and the limited partners are only making the investment in terms of the dollars. Yes, we welcome their input. They're welcome to call us anytime. They get monthly updates on what's happening but from a liability standpoint and from a standpoint of, to be perfectly honest, you know, only having so many chiefs and not too too many cooks in the kitchen, which is at the end of the day, better for the investment, you have to keep it limited to a small number of people. So we don't have more than two or three folks in that, sort of, key decision role so that when a decision needs to be made, we can make quick decisions and stick with them.

 

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