How do I structure a letter of intent for a multifamily portfolio acquisition?

Your LOI should address: total portfolio price and individual asset allocation; diligence period and access logistics for multiple properties; single closing versus sequential closings; earnest money structure (how much goes hard, in what increment, per asset or portfolio-level); financing commitment deadline; and key assumptions (occupancy and rent levels that, if materially different from represented, allow price adjustment). Have your attorney review the LOI before submission, in portfolio transactions, LOI terms often directly inform the final PSA.

What is cross-collateralization and why does it matter in portfolio financing?

Cross-collateralization means that all assets in a portfolio loan secure all of the debt, regardless of which individual asset generated the problem. If one asset is severely distressed, the lender can accelerate the entire loan and foreclose on all assets. This is a significant risk in portfolio financing, a single bad asset can cause the lender to pressure the entire portfolio. Individual asset financing eliminates cross-default risk but adds complexity and may not be available for all assets simultaneously.

Should I require the seller to transition property management as part of the purchase agreement?

Yes, explicitly. The property management transition plan, including which staff will be retained or replaced, how management accounts and systems will be transferred, and what transition assistance the seller will provide, should be negotiated in the PSA rather than as a post-closing improvisation. Sellers of troubled portfolios sometimes have management company relationships they want to preserve; clarifying this expectation before closing avoids conflict.

How do investors typically structure equity for a distressed multifamily portfolio acquisition?

Common structures: (1) single fund or LLC with all investors as limited partners, operator as GP; (2) individual property LLCs with a master holding company that allows per-asset tracking of performance; (3) programmatic JV with a single institutional equity partner who provides most of the capital in exchange for preferred return and co-GP rights. The right structure depends on the number of investors, the tax preferences of the LP base, and the reporting requirements of any institutional capital.

What happens if one property in a portfolio acquisition fails to close?

This depends on how the purchase agreement is structured. If each property has a separate PSA, the closing of other assets is not affected. If there is a single portfolio PSA, the treatment of a failed individual closing depends on whether it is a "walk" provision (if any asset cannot close, buyer can walk the entire portfolio) or a "forced closing" provision (buyer must close all assets that are ready to close). Negotiate this provision carefully, sellers want forced closings; buyers want flexibility.

How to Acquire a Troubled Multifamily Portfolio