Exit Strategies: Buy-Sell, Forced Sale, Hold

After lease-up or strata sales, the project is wound down and capital is distributed through the waterfall. The cleanest exit and the one most JV agreements assume.

At stabilization, the project is refinanced into long-term debt and partners either keep their position or are bought out at appraised value.

Partner A names a price. Partner B must either buy A's interest at that price or sell their own at the same price. The mechanism forces an honest price because the proposer doesn't know which side they'll end up on.

If any partner gets an outside offer for their interest, the other partners have a window to match. Less aggressive than a shotgun, more common in three-way deals.

Specific events (default, deadlock, breach, death) that force a sale of the entire project. Drafted as a last-resort mechanism.

Drag-along forces minority partners into a majority sale. Tag-along lets minority partners join a majority partner exiting on outside terms.

What is the cleanest exit for a BC multiplex joint venture?

Selling at stabilization, after lease-up or strata sales, is described as the cleanest exit and the one most JV agreements assume. The project is wound down and capital is distributed through the waterfall, which works for build-to-sell deals or build-to-rent deals that reach refinance-friendly stabilization.

What is a refinance-and-hold exit in a multiplex JV?

In a refinance-and-hold exit, the project is refinanced into long-term debt at stabilization, and partners either keep their position or are bought out at appraised value. This exit works for build-to-rent deals where one or more partners want to convert into a long-term landlord position.

How does a shotgun buy-sell clause work in a two-party JV?

In a shotgun buy-sell, one partner names a price, and the other partner must either buy that partner's interest at the stated price or sell their own interest at the same price. Because the proposer does not know which side of the trade they will end up on, the mechanism forces an honest price, and it works best in two-party deals with no third-party buyer available.

What is a right of first refusal in a multiplex JV agreement?

A right of first refusal gives the other partners a window to match any outside offer a partner receives for their interest. It is less aggressive than a shotgun clause and is more common in three-way deals where partners want to control who joins the venture without forcing a deadlock-breaking sale.

When does a forced sale trigger get used in a multiplex JV?

A forced sale trigger is drafted as a last-resort mechanism tied to specific events such as default, deadlock, breach, or death, and it forces a sale of the entire project. Every JV should have one, but it gets used only after softer remedies have already been exhausted.

What is the difference between drag-along and tag-along rights in a JV?

Drag-along rights force minority partners into a majority sale, while tag-along rights let minority partners join a majority partner who is exiting on outside terms. These rights fit JVs with passive capital partners and an active sponsor who may want to sell to a strategic buyer.

How many exit mechanisms should a multiplex JV agreement include?

The page recommends that at least three exit mechanisms appear in the agreement, since a JV without a clear exit path is described as a lawsuit waiting to happen. Buy-sell pricing needs to be a mechanical formula rather than something open to interpretation.

Why does a multiplex JV agreement need more than one exit mechanism?

An agreement that only contemplates the happy-path exit, where everyone agrees to sell together, leaves no answer for deadlock, a partner who wants out early, or a forced event like death or default. Combining sell-at-stabilization, refinance-and-hold, buy-sell, right of first refusal, forced sale, and drag/tag-along rights covers the realistic range of ways a JV actually ends.