In the real estate business, when plans don’t work out like expected and various parties of the first part are involved with various parties of the second part you know that lawyers will be getting in on the action. The tangled webs of mortgage securitizations and credit default swaps whipsaw some investors who may be overleveraged in lagging markets. Developers and their lenders start to get more nervous as buildings come out of the ground and leasing falls short of projections. Money partners start to grumble. Project meetings turn more serious and reflective: Tight looks and folded arms replace backslapping bonhommie. 

During the last commercial real estate downturn, the circa 1990 market implosion, it was quite amazing to see business “friendships” torn abruptly asunder over various contract covenants, albeit exposure in some cases to tens of millions of dollars or more. Suddenly John or Jimmy or Tex “my good friend and business visionary partner” turned into “that s.o.b. who we “should sue into the ground.” In the mid-1990s aftermath, the wisdom floated among institutional investors was to avoid joint ventures with developers, “who were only in it for themselves.”

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