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Planning for the Rescue Capital Wave of 2023: Tax and Non-Tax Considerations for Rescue Capital Transactions

Recording of a 90-minute premium CLE/CPE video webinar with Q&A

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Conducted on Tuesday, March 7, 2023

Recorded event now available

or call 1-800-926-7926

This CLE/CPE webinar will provide holistic guidance on key tax planning issues in rescue capital transactions and discuss tax planning considerations for parties involved in such transactions, including (i) modifications to capital stacks and resulting changes to allocations and distribution rights (ii) debt verses equity considerations, (iii) managerial and control issues with respect to tax elections, and (iv) state and local tax pitfalls.

Description

Heading into 2023, it is clear that inflation, interest rates, decreased valuations, and geopolitical unrest, together with the uncertain future of major asset classes (particularly office and retail), will lead to a wave of distressed real estate transactions. This may result in a familiar pattern of workouts, bankruptcies and foreclosures relating to existing indebtedness. However, there is a less familiar trend emerging, one that harkens back to the stagflation era of the early 1980’s: rescue capital transactions.

Many real estate ventures with positive cash flows will find the need for recapitalization due to the current market environment where refinancing is unavailable, debt maturity may be approaching, and current valuations make dispositions unattractive and impracticable. At the same time, private equity firms and other alternative sources of capital, including family offices, have an unprecedented amount of “dry powder” in their reserves, and an interest in filling the gap.

These developments are generating great interest, both by existing owners and potential investors, in so-called “rescue capital” real estate transactions. Rescue capital real estate transactions, often structured as a hybrid between equity and debt, may present a number of important tax and non-tax considerations for both existing real estate investors and the investment sources looking to opportunistically provide such rescue capital.

Listen as our panel discusses key tax and non-tax considerations for rescue capital real estate transactions and provides planning techniques and considerations for parties engaged in such transactions.

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Outline

  1. Rescue capital structured as equity: modifications to the capital stacks
  2. Managerial control issues and tax elections
  3. Debt verses equity characterization considerations
  4. State and local tax planning and pitfalls

Benefits

The panel will discuss these and other key issues:

  • Many real estate investment vehicles are suffering from an “equity gap” in their capital structure due to inflation, higher interest rates, economic uncertainties and changing real estate usage.
  • As a result, many properties with solid fundamentals are no longer financeable without an infusion of equity or equity-flavored debt. Lenders are much less willing to “extend and pretend” and many existing owners do not want to sell based on current valuations but will accept a “squeeze-down” to survive.
  • “Rescue capital” is aggregating to provide the missing capital, but these transactions will require an understanding of complex “dirt,” tax, finance and insolvency issues.

Faculty

Becker, Joshua
Joshua M. R. Becker, J.D.
Partner
Pillsbury Winthrop Shaw Pittman

Mr. Becker is a Tax attorney with over 10 years of international law firm and accounting firm experience. He counsels...  |  Read More

Weiner, Andrew
Andrew J. Weiner
Partner
Pillsbury Winthrop Shaw Pittman

Mr. Weiner’s practice is global in scope, with a significant and sustained concentration on transactions in the...  |  Read More

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Strafford will process CLE credit for one person on each recording. CPE credit is not available on recordings. All formats include course handouts.

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