The Situation
JK
I want out of the Marquette company. I want my $800,000 back and whatever equity is left. I want to dissolve the partnership. I don't care if Eric keeps his half or if we sell everything and split. The problem is the partnership itself. I want out. I want the liquidity.
A
The portfolio:
12 buildings · 96 units · $6.2M value · $3.02M debt · $3.18M equity
John put in $800K capital. Wants $800K post-tax dollars back — dollar for dollar. Plus his 50% equity share. Eric can't write a check. His liquidity is tied up in the same portfolio.
Three questions: How much is John owed? What buildings need to sell? What does Eric do with what's left?
The Numbers
John's Full Claim
Portfolio value (conservative)$6,200,000
Total mortgage debt$3,018,576
Net equity$3,181,424
John's capital investment$800,000
John's 50% equity share$1,590,712
Total owed to John~$1,853,052
Step 1 — Sell the 7 Buildings
A
The 7 buildings — Princeton, Ladd 4, Ladd 8, LaSalle 7, LaSalle 4, Walnut, Earlville — are the ones from the original S2 scenario. Sell these. Eric keeps his 5 Marseilles + Cleveland buildings with their mortgages intact.
7-Building Sale
Gross sale proceeds$3,095,000
Closing costs (5%)-$154,750
Loan payoffs on 7 buildings-$1,412,265
Federal tax (recapture + cap gains)-$171,750
Illinois state tax (4.95%)-$58,560
Net cash to Marquette$1,297,675
JK
Marquette pays the taxes. The cash gets submitted to the individuals post-tax. The $800k needs to be paid in full — post tax money for post tax money.
A
Correct. Marquette sells, pays all taxes at entity level, distributes clean post-tax cash.
Distribution from 7-Building Sale
Net cash$1,297,675
Return John's $800K capital first-$800,000
Remaining pool$497,675
Split 50/50 — John$248,838
Split 50/50 — Eric$248,838
John's total (Step 1)$1,048,838
Step 2 — John's Remaining Equity in Eric's 5
Eric's 5 Buildings
1060 Orange$590,000 value · $270,000 debt · $320,000 equity
1070 Orange$860,000 value · $566,423 debt · $293,577 equity
390 Railroad (free & clear)$290,000 value · $0 debt · $290,000 equity
Marseilles Ranch$460,000 value · $281,720 debt · $178,280 equity
Ladd Cleveland (301/303)$1,000,000 value · $473,428 debt · $526,572 equity
Total value$3,200,000
Total debt$1,591,571
Total equity$1,608,429
John's 50% stake$804,214
The Best Structure for Both Parties
JK
What's the best option for both parties?
A
The full refi hurts Eric too much. $71K/yr after a $2.4M refi barely covers his nut with zero cushion. One bad month and he's underwater.
The move: Sell Cleveland. Carry the rest as a note.
Cleveland is the highest-equity building — $1M value, $526K equity. Sell it. That knocks down most of John's remaining claim. Eric carries the gap as a structured note, paid from rental income on the 4 Marseilles buildings he keeps.
Cleveland Sale
Sale price$1,000,000
Closing costs (5%)-$50,000
Loan payoff-$473,428
Tax (~25%)-$119,143
Net to John~$357,429
Remaining gap (note)~$446,785
Promissory Note — Eric to John
Note amount~$447,000
Rate5%
Term7 years
Monthly payment~$6,300
Eric's cashflow after note~$12,475/mo · $149,700/yr
Final Outcome
John Kidd — Walk Away
From 7-building sale$1,048,838 cash
From Cleveland sale~$357,429 cash
Promissory note (7 yrs)~$447,000
Total~$1,853,000
Eric Fitzpatrick — What He Keeps
4 Marseilles buildings$2,200,000 value
Monthly rent~$30,110
Monthly cashflow (after note)~$12,475
Annual cashflow~$149,700
Eric's cash from sales$248,838
StatusSole owner · No partner
The Verdict
Clean on both sides
John gets his capital back plus full equity claim — $1.853M total. Eric keeps a real portfolio with real cashflow. Neither party is squeezed. The note is manageable. The deal works.
A
Next steps before talking to Eric:
1. Real estate attorney — Illinois LLC dissolution, buyout rights
2. CPA — confirm tax numbers, structure the transaction
3. Get appraisals on all 12 buildings — establishes the non-arguable number
4. Then have the conversation. You're not asking permission. You're presenting options.