Quote:
Originally Posted by Skyguy_7
A buyout = this is expected to be a lucrative development = construction imminent
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It's actually a signal of the opposite--JDS didn't choose to buy anyone out, Chetrit chose to exit. The transaction was the result of the exercise of a Put Option, which is a sign that at least Chetrit thinks that this deal is less attractive than when he first got involved.
It's pretty common for an investor to negotiate for an exit right like this in these scenarios--the concern is that it's pretty difficult to sell a minority equity stake in a development deal because the market isn't very deep for buyer's of partially-built structures (investors typically want to buy potential development sites or projects that are already built, or at least fully financed, not projects halfway in between). To alleviate the fear of getting stuck in a deal without the ability to sell, the investor may negotiate for the right to force the developer to buy them out at a predetermined price so that they can exit if they need/want to.
There are all kinds of triggers for a put option--sometimes it's failure to hit a milestone by a certain date, or other times it's just an option that is exercisable within a certain window of time. No way to know whether this put was triggered by a bad situation, but the one thing we know for certain is this: Chetrit chose to get his money out now rather than stay in and have a share of future profits, which means that he isn't optimistic about where this is headed.
It's also possible that Chetrit loves this deal and just needed to get his money back because he has a liquidity issue somewhere else, but I doubt it.
This is my single favorite development proposal in the city and I'm really rooting for it to succeed. That said, there is no positive spin on Chetrit exercising his right to force JDS to buy him out.
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