Why This Matters Now

When a capital partner needs liquidity before the business plan is complete, a whole-asset sale typically transfers control to the market at the wrong point in the cycle and often undermines the original underwriting. A JV continuation solves for capital, not operations. The plan remains intact, the operator stays in control, and the exiting partner is redeemed at a fair price.

A practical way to view a JV continuation is as a targeted secondary sale of the partner’s JV interest, executed within the existing ownership structure rather than through a property sale.

When a JV Continuation Is the Right Tool

The catalyst is usually institutional, not personal. Common triggers include:

• End of fund life and DPI pressure

• Portfolio rebalancing or mandate drift

• Platform-level liquidity needs or redemptions

• A refinance gap or timing mismatch between NOI ramp and fund termination

In these situations, the asset may be performing, but the capital clock is not.

A continuation enables the operator to introduce replacement capital, often through a dedicated continuation vehicle, and redeem the exiting partner while maintaining continuity at the property level. Leasing, vendor relationships, and lender connectivity remain in place.

Operator litmus test: If the next 24 to 36 months are expected to capture the majority of value through lease-up, capex completion, and operating leverage, selling today is frequently a transfer of option value to the buyer. In that case, a continuation should be evaluated as a primary alternative to a sale.

JV Agreement Provisions That Matter

Before engaging the market, the governing documents determine whether a continuation is efficient or obstructed.

Key provisions to confirm include:

• Transferability of interests, admission of a substitute member, and consent standards

• Decision thresholds (majority vs unanimous) for budgets, capex, refinancings, sales, and material leases

• ROFO and ROFR provisions that may delay or block execution

• Change-of-control concepts in both JV and loan documents that may be triggered by an interest transfer

Promote mechanics require explicit clarity: whether a transfer crystallizes the promote, whether the promote resets, and how catch-ups and hurdles are treated when replacement capital is introduced.

Deadlock and default provisions function as essential backstops. If negotiations stall, there should be a defined resolution mechanism, such as a buy-sell, independent expert determination, or managing member call right.

Finally, fees and governance should be reviewed and restated where necessary to reflect the new capital base and risk profile. Ambiguity in these areas is best resolved before marketing begins.

Process That Preserves Value

Well-executed continuations are typically operator-led and deliberately controlled, designed to create price tension while closing efficiently.

Internal valuation firstDevelop a defensible pricing framework:

• NAV and DCF grounded in the current business plan

• Stress testing for debt costs, capex, and leasing timing

• Explicit treatment of hedge mark-to-market and break costs

Targeted buyer universeA focused list generally outperforms a broad outreach. Typical candidates include:

• Sponsor-led continuation vehicles

• Institutional secondaries funds

• Insurers and other long-duration capital

• Select real estate private equity platforms

• Concentrated, sophisticated family offices

Staged diligence and pricingA common sequencing is:

1. NDA and teaser

2. Data room access with a clear index (leases, lender file, capex, environmental, tax basis, hedges, litigation)

3. Non-binding indications based on a structured data pack

4. Shortlist with management sessions and property tours

5. Confirmatory diligence and final documentation

Where the operator is conflicted, an independent valuation and/or documented market check is typically required, supported by process records that demonstrate conflict management.

Closing considerationsExecution often hinges on consents and conditions precedent, including lender approvals, ground lessor consents, tenant estoppels where applicable, transfer-tax planning, KYC/AML, and withholding/FIRPTA documentation. Timelines commonly range from 60 to 120 days depending on consent posture and complexity.

Capital Options and What They Optimize

Different capital sources prioritize different outcomes:

• Sponsor-led continuation vehicles typically align naturally with the plan and often incorporate fairness opinions and a formal IC-style process.

• Institutional secondaries funds can provide pricing certainty and process rigor, but may seek tighter governance and promote adjustments.

• Insurers and permanent capital often prefer longer holds and lower cost of capital, emphasizing yield, hedging, and downside protection.

• Large family offices can be structurally flexible, but frequently require concentration-level transparency and direct access.

In some cases, NAV loans or preferred equity can serve as partial-liquidity bridges. These solutions can preserve the cap table but introduce seniority above common equity, often increasing intercreditor and refinancing complexity.

The optimal choice depends on what the asset needs most over the next three years: certainty of capital, stability of governance, or minimized cost of capital.

Legal, Tax, and Regulatory Considerations

Continuations often touch multiple regimes, and several issues can materially affect timing if not addressed early:

• Lender consents: transfers, promote resets, and governance changes are frequently consent items.

• Transfer taxes: some jurisdictions treat transfers of controlling partnership interests as property transfers.

• Withholding and FIRPTA: typically applicable absent exemptions; documentation should be embedded in the closing checklist.

• ERISA, REIT, and UBTI: structures may need to address plan-asset status and related constraints.

• CFIUS and similar reviews: usually not relevant, but proximity to sensitive uses or locations can change that assessment.

Early coordination with tax and local counsel can prevent avoidable delays.

Governance Reset

A continuation is an opportunity to improve the operating system, not simply replace capital.

Key governance items to hardwire:

• A decision matrix with defined thresholds for budgets, capex, leasing economics, debt actions, and disposition

• A distribution waterfall that clearly addresses current yield, catch-up, promote mechanics, and any resets

• Reserve and trapped cash provisions that reduce ambiguity

• Reporting standards that strengthen the operator-capital relationship (monthly flashes, quarterly packages, KPI tracking, variance approvals)

• Ownership and process clarity around hedging, reserves, rate locks, and refinancing

• Dispute and exit mechanics that keep both parties accountable (buy-sell arrangements or time-boxed sale rights beginning in a specified year)

Governance should be drafted for a volatile rate environment, because that is the environment most portfolios continue to operate within.

Valuation That Withstands Investment Committee Review

The objective is to price the interest, not only the real estate.

A defensible valuation package typically includes:

• NAV baseline (asset value minus debt, working capital adjustments, hedge MTM)

• DCF grounded in the operating plan and hedging-informed cost of debt

• Comparable transactions framed around the specific rights of the interest (minority versus control)

• Full modeling of promote crystallization, rollover, and reset mechanics

• Explicit treatment of accrued fees and leasing liabilities (TI/LC)

Document assumptions and exchange models with buyers early. Valuation alignment is often where late-stage execution risk is either reduced or amplified.

Due Diligence That Builds Confidence

Sophisticated buyers will diligence:

• Lease file integrity, co-tenancy and termination risk

• Capex scope, GMP structures, and contractor exposure

• Loan terms, covenants, lender relationship dynamics, and hedging

• Tax basis, step-up considerations, and structural leakage

• Environmental, litigation, and compliance history

Operators should diligence buyers with equal rigor: capital source certainty, IC cadence, operating-partner track record, workout behavior, and readiness to meet consent timelines. References and proof of funds are standard.

Decision Rule

If conviction in the asset and business plan remains strong and the primary issue is the partner’s timing or cost of capital, a continuation process is typically warranted. If conviction has weakened, or the market thesis has changed, an asset sale may be the more appropriate outcome.

Operator Checklist

• Confirm transfer and consent requirements in the JV and debt documents

• Establish valuation with NAV and DCF, including promote mechanics, and define an internal walk-away level

• Pre-clear transfer tax, withholding, and structuring considerations with counsel

• Build a disciplined data room and concise management presentation

• Select an advisor and define a short, credible buyer list

• Set a timetable that fully incorporates lender and third-party consents

• Restate governance, reporting cadence, and decision thresholds

• Align hedging strategy, refinancing plan, reserves, and distribution policy

• Obtain an independent valuation or market check where conflicts exist

• Close with clean funds flow and a complete compliance package

Bottom Line

A JV continuation is not a workaround. It is a precision tool. Executed properly, it preserves operational continuity, prices the interest rather than forcing a property sale, and converts a partner’s liquidity constraint into a durable capital solution without restarting the business plan.