Liquidation analysis for 25% interest in LLC in a
Posted: Thu Oct 02, 2014 12:39 am
I think an expert would want to see financials, history, etc. assuming the
restaurant is okay and has been operating for a while, debt structure is
otherwise good, I would say that it's worth about $40,000. Basically, at
40k, you're making a 20% ROI assuming paid in full. What if paid for only
2.5 years? The guy is making out with 18% ROI. That's pretty damn good.
I don't know if the a market test would find buyers but I suspect at 40k
and assuming decent financials for restaurant, this would be an amazing
deal.
If the restaurant has excellent financials, 100k promissory note is worth
60k. It's definitely not valueless.
I also think that 25% ownership interest in LLC that owns a $5,000,000
property is probably worth more than $1.250 million. Mostly because an
expert would want to know the NOI or cap rate used to calculate the
$5,000,000 figure. Suppose it is calculated using a cap rate of 5.75% and
it's a grade A property (typical for Las Vegas).
An LA investor looking to move into the market is thinking 4.00% is what I
get in LA. This property is wroth $7.2 million to him. This is assuming the
$5 million is not a low ball.
If you look at it another way, this property is returning $6,000 or so per
month to the 25% shareholder-- that's pretty damn good. Of course, I used
some big assumptions like that the income based approach will yield the
highest and best use, that cap rates from last year still apply to this
year.
Sincerely,
Michael Avanesian
On Wed, Oct 1, 2014 at 6:51 PM, Holly Roark hollyroark22@gmail.com [cdcbaa]
wrote:
>
>
> But how much would you pay for such a note? Hypothetical: note is worth
> $100k. Monthly payments are $1666.67 for 5 years. The promissor is a
> restaurant. Restaurants are shaky. How much would you pay for the hope of
> getting all those payments?
>
>
> On Wednesday, October 1, 2014, Michael Avanesian michael@avanesianlaw.com
> [cdcbaa] wrote:
>
>>
>>
>> I completely agree with Cliff. I also wanted to add that the solvency of
>> the obligor on the note has a lot to do with its value too. I don't need
>> Bill Gates to personally guarantee Microsoft's debts, I'll take my chances!
>>
>>
>> Sincerely,
>> Michael Avanesian
>> Law Offices of David A. Tilem
>> www.tilemlaw.com
>> 818-507-6000
>>
>> On Wed, Oct 1, 2014 at 5:37 PM, Clifford Bordeaux cliff@bordeauxlaw.com
>> [cdcbaa] wrote:
>>
>>>
>>>
>>> I am not going to cite any law, but here are my two cents:
>>>
>>> In both scenarios, the asset has a value. In the LLC scenario, the
>>> value of a 25% interest in an LLC is less than 25% of the net value of the
>>> LLC's underlying assets. Estate planners frequently obtain appraisals which
>>> take into account a "minority interest discount" for purposes of estate tax
>>> planning. But determining the appropriate discount may require an expert
>>> opinion. In the promissory note scenario, the value of the note is
>>> certainly less than the face value of the note, due to the uncertainty of
>>> collection. But the note still has value and the debtor needs to try to
>>> determine the value.
>>>
>>> Ideally, in both scenarios, you would get an appraisal of the present
>>> value of the cash flows, taking into account the illiquidity of the asset,
>>> uncertainty of future payments, projected taxes, etc. However, if the
>>> client is unwilling to pay for an appraisal, you could still ask the debtor
>>> to come up with their own subjective valuation of the asset (ie: what is
>>> the amount for which they would be willing to sell the asset), but a
>>> creditor or Ch 13 trustee could still object to the liquidation analysis if
>>> the debtor's valuation seems too low.
>>>
>>> Hopefully, if there is an objection, you can negotiate a reasonable
>>> valuation that both sides can live with, without running up huge bills for
>>> expert opinions.
>>>
>>> Clifford Bordeaux
>>> Certified Bankruptcy Specialist*
>>> Bordeaux Law, P.C.
>>> 3731 Wilshire Boulevard, Suite 600
>>> Los Angeles, CA 90010
>>> T: 323-762-5529
>>> F: 626-628-1820
>>> E: cliff@bordeauxlaw.com
>>> WEB: www.bordeauxlaw.com
>>> *By State Bar of California Board of Legal Specialization
>>>
>>> On Wed, Oct 1, 2014 at 5:14 PM, Holly Roark hollyroark22@gmail.com
>>> [cdcbaa] wrote:
>>>
>>>>
>>>>
>>>> If I can piggy back on this question: What about a scenario where
>>>> Debtor has an unsecured promissory note, face value $X where she is
>>>> receiving $Y monthly payments, supposed to be over the next 5 years, but
>>>> when she tried to sell the note, she was told twice by brokers that the
>>>> note was "unsellable" because there was no personal guaranty associated
>>>> with it? Does it have any liquidation value for purposes of Chapter 13 if
>>>> no one is buying it? The income stream has been steady, but still, brokers
>>>> say no one would want to buy it because of the risk. I am thinking it's
>>>> income for the Plan, but not an asset for liquidation value.
>>>>
>>>> I would like to hear your thoughts.
>>>>
>>>> Holly Roark
>>>> Certified Bankruptcy Specialist*
>>>> *and Sports Lawyer*
>>>> holly@roarklawoffices.com **primary email address**
>>>> www.roarklawoffices.com
>>>> Central District of California
>>>> Consumer Bankruptcy Attorney
>>>> 1875 Century Park East, Suite 600
>>>> Los Angeles, CA 90067
>>>> T (310) 553-2600
>>>> F (310) 553-2601
>>>>
>>>> *By State Bar of California Board of Legal Specialization
>>>>
>>>>
>>>> **For a quicker response, email me at holly@roarklawoffices.com.
>>>> I only use gmail for my listservs, and am likely to miss private emails
>>>> directed to my gmail account.**
>>>>
>>>>
>>>> On Thu, Sep 25, 2014 at 10:33 AM, Gaurav Datta gdatta@gmail.com
>>>> [cdcbaa] wrote:
>>>>
>>>>>
>>>>>
>>>>> Hi all,
>>>>>
>>>>> I have a prospective client who has modest assets except for a 25%
>>>>> interest in an LLC that owns an apartment complex in Las Vegas worth $5
>>>>> Million. The liquidation of of the LLC would not be similar to the
>>>>> liquidation of a real estate holding in a hypothetical 7 since a 25%
>>>>> interest is not enough to force a dissolution of the LLC. The other
>>>>> members must agree to who buys the 25% interest and, since the other 3
>>>>> members are his father, mother, and brother, that is not going to happen.
>>>>>
>>>>> The LLC does make a profit via rents and I am anticipating having to
>>>>> do a net present value analysis on the LLC based on the monthly rent.
>>>>> Before I jump that far, am I looking at the liquidation of the LLC
>>>>> correctly? Does the code even care about the reality of trying to
>>>>> liquidate a multi-member LLC or does the code simply pretend the equity in
>>>>> the LLC's assets the liquidation value?
>>>>>
>>>>>
>>>>>
>>>>> *Gaurav Datta, Esq.,LL.M444 W. Ocean Blvd, Suite 1401*
>>>>>
>>>>>
>>>>> *Long Beach, CA 90802Phone: 562-435-9062 Fax:
>>>>> 562-281-6158 *
>>>>> *www.dattalawgroup.com *
>>>>>
>>>>> "My formula for success is rise early, work late, and strike oil."
>>>>> - J. Paul Getty
>>>>>
>>>>>
>>>>
>>>
>>
>
> --
> Holly Roark
> Certified Bankruptcy Specialist*
> *and Sports Lawyer*
> holly@roarklawoffices.com **primary email address**
> www.roarklawoffices.com
> Central District of California
> Consumer Bankruptcy Attorney
> 1875 Century Park East, Suite 600
> Los Angeles, CA 90067
> T (310) 553-2600
> F (310) 553-2601
>
> *By State Bar of California Board of Legal Specialization
>
>
> **For a quicker response, email me at holly@roarklawoffices.com.
> I only use gmail for my listservs, and am likely to miss private emails
> directed to my gmail account.**
>
>
>
>
I think an expert would want to see financials, history, etc. assuming the restaurant is okay and has been operating for a while, debt structure is otherwise good, I would say that it's worth about $40,000. Basically, at 40k, you're making a 20% ROI assuming paid in full. What if paid for only 2.5 years? The guy is making out with 18% ROI. That's pretty damn good.I don't know if the a market test would find buyers but I suspect at 40k and assuming decent financials for restaurant, this would be an amazing deal.If the restaurant has excellent financials, 100k promissory note is worth 60k. It's definitely not valueless.I also think that 25% ownership interest in LLC that owns a $5,000,000 property is probably worth more than $1.250 million. Mostly because an expert would want to know the NOI or cap rate used to calculate the $5,000,000 figure. Suppose it is calculated using a cap rate of 5.75% and it's a grade A property (typical for Las Vegas).An LA investor looking to move into the market is thinking 4.00% is what I get in LA. This property is wroth $7.2 million to him. This is assuming the $5 million is not a low ball.If you look at it another way, this property is returning $6,000 or so per month to the 25% shareholder-- that's pretty damn good. Of course, I used some big assumptions like that the income based approach will yield the highest and best use, that cap rates from last year still apply to this year.Sincerely, Michael AvanesianOn Wed, Oct 1, 2014 at 6:51 PM, Holly Roark hollyroark22@gmail.com [cdcbaa] <cdcbaa@yahoogroups.com> wrote:
But how much would you pay for such a note? Hypothetical: note is worth $100k. Monthly payments are $1666.67 for 5 years. The promissor is a restaurant. Restaurants are shaky. How much would you pay for the hope of getting all those payments?On Wednesday, October 1, 2014, Michael Avanesian michael@avanesianlaw.com [cdcbaa] <cdcbaa@yahoogroups.com> wrote:
I completely agree with Cliff. I also wanted to add that the solvency of the obligor on the note has a lot to do with its value too. I don't need Bill Gates to personally guarantee Microsoft&
The post was migrated from Yahoo.