Real Estate Fund Formation

Client:	Merlone Geier Partners IX, L.P.
Representation:	Investment fund formation
Date:	December 2009
Locations:	San Francisco, California

Summary:

A team of attorneys from several Schiff Hardin offices completed the formation of Merlone Geier Partners IX, L.P. (Fund IX), a $350 million discretionary real estate investment fund comprised of large institutional investors (such as university endowments and foundations), private trusts and individuals.

Fund IX's formation spanned 14 months and included three separate investor closings. Between the second and third closing, the Schiff Hardin team assisted in the creation of a subsidiary-REIT to attract a broader investor base (as the tax characteristics of the REIT made Fund IX more tax efficient to foundations wishing to invest in the fund).

The finishing touches on Fund IX were completed in December 2009 when our attorneys guided Fund IX in closing a $125 million revolving credit facility with a major bank as administrative agent, and three other lenders. The credit agreement provides the flexibility for the subsidiary-REIT, Fund IX and wholly-owned subsidiaries of both the REIT and Fund IX to borrow directly under the credit facility. The facility is secured solely by the capital commitments of the Fund IX investors, with the availability of borrowings tied to the remaining capital commitments of the "included investors." The lenders' underwriting for the transaction is based on the ratings or net worth calculations of high-net-worth institutional investors in the fund.

In addition to negotiating the primary loan documents, our team also coordinated the negotiation of investor consent documentation (consent letters and in-house legal opinions) between the institutional limited partners in Fund IX and the agent bank.