Selling a real estate partnership (note?) - Posted by Rusty

Posted by Rusty on July 14, 2005 at 24:20:47:

I will be selling shares of an LLC that is setup up for structured rental payments for 25 years so I’m not sure if that is saleable as some type of “paper” or not. I would like your opinions on it please.

My business partner and I are approximately 17.5% (8.75% each) partners in two 100% occupied medical office buildings. They are set up as LLC’s with the excess monthly rental payments distributed to the partners quarterly. I am receiving about $20,000 per year now with a 2% annual increase built in. I have been involved in this partnership for about 2 years.

Property #1 is appraised at $8.4 million and is located on a prime street in an upscale suburb of a major city. It is 100% occupied by the doctors that are our partners.

Property #2 is appraised for $1.2 million and is located in a medium sized town in the South. It is currently occupied by physicians. The partners are the same for both buildings.

Although this is an excellent long term investment for me I am about to be involved in a very large retail development and could use the additional capital now instead of later.

I believe my current partners will have the right of first refusal. I have been involved in many real estate deals but have never sought a buyout so I’m in somewhat unfamiliar waters. My questions are:

  1. What’s the best way to go about valuing our shares for this buyout proposal? Is there a rule of thumb for taking into account future value of the property and the current annual payments?

  2. If they do not want to buy us out, is this the kind of structured payment that note buyers would be interested in?

  3. What’s the best way to market our LLC shares in the open market if a simple sale of shares in an LLC is the way to go and they do not want to buy us out?

Any other suggestions would be welcome. Thanks in advance for any help you can provide.


Never tried market LLC shares but I hope you might find the right answer for it. I hope if you did like to create your own Delaware LLC you can do it by just filling few forms. Ownership in an LLC, or limited liability company, is based on a percentage of the company not by the number of shares owned. However, in practical terms an LLC can operate very similarly to a corporation that can sell shares.