The Tax Man: Taxes in Private Equity Real Estate

Teaching Note for HBS No. 218-077. This teaching note provides the back up analysis for the various alternatives to be considered in choosing the optimal investment structure for the real estate acquisition. It contrasts the interests of the tax exempt investors versus high net worth individuals. It also illustrates how to address the desire for control by the sovereign wealth funds, who have to trade off control for preferential tax status. By working through the related model, the case illustrates the trade off between the desire for a high IRR versus achieving a high Multiple on Invested Capital (MOIC). The case takes into account the effects of the Tax Cuts and Jobs Act enacted on December 22, 2017. The Teaching Note should be read in conjunction with the related Spreadsheet and Answer Key to the case. There are additional case slides which illustrate the results of the Spreadsheet.