Time for Rescue Capital? Is the Window Opening to Use Rescue Capital for Distressed Real Estate Projects?
Tax and Non-Tax Considerations in Recapitalizing Distressed Real Estate Ventures
Course Details
- smart_display Format
On-Demand
- signal_cellular_alt Difficulty Level
Intermediate
- work Practice Area
Real Property - Finance
- event Date
Tuesday, June 17, 2025
- schedule Time
1:00 p.m. ET./10:00 a.m. PT
- timer Program Length
90 minutes
-
This 90-minute webinar is eligible in most states for 1.5 CLE credits.
This CLE/CPE webinar will cover the key tax and non-tax issues for existing investors, new money, and third-party financing sources in using rescue capital to stabilize and recalibrate existing real estate vehicles whose capital structures and financing remain in distress. Topics include (1) issues that have limited the use of rescue capital to date; (2) modification of capital stacks and existing financing, and changes to allocations and distribution waterfall; (3) COI concerns and debt versus equity considerations, and (4) transfer tax consequences.
Mr. Weiner’s practice is global in scope, with a significant and sustained concentration on transactions in the New York metropolitan area. Since 1976, Mr. Weiner has represented domestic and foreign clients in equity and debt transactions, the creation of real estate funds and joint ventures, and transactions involving distressed real estate. His practice has had a significant concentration in the hospitality and real estate investment trust (REIT) sectors, and in leasing. Mr. Weiner’s clients have included funds, family offices, institutional lenders, universities, non-U.S. investors and New York City developers.
Mr. Becker is a Tax attorney with over 10 years of international law firm and accounting firm experience. He counsels clients in a diverse range of tax, business, and private wealth matters. Mr. Becker's experience includes the tax and non-tax aspects of investment fund formations, private equity mergers and acquisitions, hedge funds, family office operational and investment structures, and real estate joint ventures and investments. Prior to joining Pillsbury, he was a founding member of a multi-family office and registered investment advisor dedicated to blockchain and digital asset investors, founders, and entrepreneurs.
Mr. Jason is Managing Principal of EOS Real Estate and Financial Advisory, and leads its Board of Advisors. For over 10 years, he has been executing high-level consulting and advisory engagements for a wide range of real estate companies and investors. Having held senior executive roles with responsibilities for asset, portfolio and transaction management, legal, operations and finance, Mr. Jason brings a unique multi-disciplinary approach to his work. His clients run the gamut from banks and financial institutions, to private equity funds and real estate companies. Mr. Jason’s background ranges from work with Fortune 500 companies and law firms, to private equity and entrepreneurial start-up firms. He has also acted in principal capacities in developing strategic alternatives for real estate owners, investors and financial institutions. Among his roles, Mr. Jason played a key leadership role in building a Goldman Sachs company into its largest operating partner in North America.
The real estate industry is in the fourth year of stress caused by an inflationary, high interest rate environment, remote work, and other changes in demand and use patterns across industry sectors. Many joint ventures have capital stacks that have buckled or are shaky due to the "equity gap" that has resulted. The real estate world is replete with properties that have experienced foreclosure, short sales, or deeds in lieu, but many troubled owners are hanging on in an "extend and pretend" status, or threatened by a loan maturity or lease expiration that will destabilize them, or are trapped by a lender unwilling to take back the property.
In past cycles, and to a limited extent so far in the current environment, distressed real estate owners had the option of a rescue capital event, in which preferred equity would be injected into existing capital stacks by new capital sources. The result would be a squeeze down or squeeze out of the original ownership group, but their retention of some rights to future economics and a potential deferral of tax consequences. Existing lenders could participate in this infusion, and debt would almost always have to be renegotiated or rejiggered.
Conversely, since 2022 private equity firms and other alternative sources of capital, including family offices, have joined institutional lenders in amassing an unprecedented amount of "dry powder" in reserve for these transactions, waiting for a "goldilocks" moment in which there is room in the capital stacks for their investment.
As the real estate environment ameliorates, rescue capital will generate increasing interest from both existing owners and potential investors. However, rescue capital transactions often are structured as hybrids between debt and equity, and thus present numerous tax and non-tax considerations for all parties. These are extremely complicated and sophisticated transactions, including from a tax perspective, and require highly seasoned advisers on all sides.
Listen as our hybrid panel, one "dirt" lawyer, one tax lawyer, and a real estate capital markets expert, discusses key tax and non-tax considerations and structures and planning techniques for parties seeking to engage in rescue capital transactions.
I. What makes rescue capital a feasible structure for a distressed entity? How would it address modifications to tax and debt structures?
II. Managerial and control issues and tax elections
III. How and why to manage the characterization of the new funds as debt or equity
IV. Transfer tax consequences
The panel will decide these and other key issues, with a goal of:
- Providing a guideline for determining if a transaction is amenable to rescue capital
- Discussing the decisions facing all parties and the major issues to be addressed to effect successful rescue capital transactions
- Outlining a user-friendly introduction to the tax issues which infuse the rescue capital structuring and negotiations
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