Minority Shares: It’s Complicated
There is seemingly an infinite number of ways real estate is owned and sold.
In most cases, the owner of real estate has a deed for a property, and when the property sells, the deed is transferred to the new owner in exchange for value. In other cases, the property may be owned as shares in a corporation.
I recently closed a deal for a shareholder of a minority interest in a building in Tribeca, New York City. I went into the situation knowing that it is a challenge to sell a minority interest, because the potential buyer does not obtain control of the asset. In this case, my client wished to sell its shares but needed to obtain a bona fide offer for its interest in the building to present to the other shareholders—shareholders who, as part of their shareholders’ agreement, enjoyed the right of first refusal.
Our goal was to find a buyer that would tender a reasonable offer while knowing that the time and effort the buyer would expend might be in vain. I was able to find a potential buyer who was specifically interested in the type of property being sold, and was, therefore, willing to take the time and bear the risk. The buyer made a fair offer, and the seller accepted it.
Ultimately, the other owners (i.e. other shareholders) exercised their right of first refusal and bought my client’s share for the amount of the bona fide offer.
It was a positive outcome (except for the potential buyer) to a complex situation in which the seller was not selling real estate but an interest in the corporation that owned a real estate asset.
Understanding the different ways that building ownership is held is tricky. That is why it is best to turn to someone who has devoted 30 years to the real estate business. To find out how I can help you, contact me here.
George E. Grace
G.E. Grace & Company, Inc.
232 Madison Avenue
New York, NY 10016