David A. Davenport

My Approach

I was trained to be a trial lawyer, so everything I do with a problem, whether it is a partnership dispute in the LIHTC industry, a construction or real estate dispute, shareholder dispute, or some other business, commercial or intellectual property dispute, is strategically aimed toward positioning my client for the most optimal resolution to their problem; with an understanding that if the problem can only be fixed in a court of law then we are positioned well and ready. Ideally, problems can be resolved through negotiated business to business resolutions, but many times problems may only be resolved in court or some other dispute resolution process like arbitrations. Either way, when I work with my clients to solve problems I bring a seasoned approach with an eye toward being jury ready if we need to go there.

I also believe that almost no problem, whether settled amicably or fought hard before a jury, lies on the shoulders of one person, so I take a team-oriented approach and involve my clients in such as a way as I am working with them rather than for them. It is also of paramount importance that I understand my clients’ business, and know “the deal” and intentions from which the problem arose so that I may work to achieve the most optimal outcome for my clients. Throughout the process, I look to provide effective, efficient solutions to complex issues facing my clients, and I bring a direct approach to complicated disputes and emotionally charged situations.

Outside of work, my wife, kids and I enjoy all that the outdoors has to offer, including winter sports, hunting, camping, hiking, and biking.

A Groundbreaking Moment in My Career

In 2013, I realized that significant changes were occurring in the Low Income Housing Tax Credit (“LIHTC”) or affordable housing industry and I set out to determine why.  As the industry has matured and changed over the years, there has been an increase in disputes that arise near the end of the 15-year Compliance Period.  These specialized exit disputes involve extremely complicated transactions, new and existing parties, and parties whose objectives have changed since inception of the partnerships. Adding to these complex issues is the fact that this is still a relatively young industry insofar as partner disputes are concerned, thus there is very little specific case law to look to in order to resolve these disputes.

Now, a significant amount of my practice concerns disputes in the LIHTC industry.  I focus my representation on real estate developers who are general or managing partners in disputes involving business partnerships in the affordable housing industry, and I have a particular expertise in litigating partnership exit disputes.  I have been on the forefront in litigating these matters since 2013, and in many cases helping to create that much-needed case law ourselves. The precedents we achieve on behalf of our clients are already working to frame future cases and negotiations, as well as inform future LIHTC partnership agreements, and we continue to uncover emerging controversies in this area.  Some of the issues that have arisen in these Year-15 exit disputes include:

• Disputes over Purchase Options, Put and Call Rights, and Rights of First Refusal
• Fair Market Value and Appraisal Disputes
• Disputes over Purchase Option Price Determinations
• Ownership Interest Disputes
• Capital Transaction Disputes
• Capital Account Disputes
• Disputes concerning Forced Sale Rights
• Project Refinance Disputes
• Limited Partner Removal Initiatives
• Qualified Contract Issues

As a result, I frequently advise clients on their rights, obligations and duties under their Partnership Agreements and other operative documents to avoid litigation, but with the increasing number of “exit issues” and “year 15 disputes” facing the industry, a significant part of my practice involves litigation in this complex area.  Throughout my career, I have frequently represented business owners in partnership disputes, so I bring an experienced approach to dealing with these complicated partnership structures and business disputes in the tax credit industry.

In light of the depth and expertise that I have developed over the years in this area, I am a frequent speaker or panelist at various LIHTC industry conferences and events.  I firmly believe that industry participants must work together to take control of the problems that have emerged in recent years due to the emergence of “The Aggregator,” and have written about the subject in articles published in Tax Credit Advisor. I also serve on the National Housing Trust Preservation Working Group, a national coalition dedicated to the preservation of multifamily housing for low-income families.

Representative Matters

• Representation of Centennial Partners, an affiliate of Milwaukee, Wisconsin based real estate developer Wimmer Communities, in a Low Income Housing Tax Credit Year-15 Exit dispute involving a 97-unit affordable senior housing development in Oak Creek, Wisconsin, owned by Centennial, LLC.  The dispute centered around Centennial Partners’ effort to exercise and close on its option to purchase the limited members ownership interests in Centennial, LLC.  The limited members were ORC Tax Credit Fund 10, LLC and SCDC, LLC, both managed by and affiliated with Wentwood Capital Advisors, LP (“Wentwood”).  Through Wentwood, the limited members refused to sell their ownership interests in Centennial, LLC to Centennial Partners for fair market value and sought, instead, to recover a more than $1 million positive capital account balance in the form of a cash payment.  In December 2018, a Milwaukee County Circuit Court granted summary judgment to Centennial Partners, confirming that its exercise and pursuit of its purchase option was not a capital transaction, and therefore did now allow for consideration of a positive capital account when determining the fair market value of the limited members’ ownership interests in Centennial.  Following this decision, the case went to a jury trial on Centennial Partners’ claims of breach of contract and breach of the duty of good faith and fair dealing.  The jury was also asked to determine the fair market value of the limited member interests in Centennial, as well as Centennial Partners’ claim for damages.  On behalf of the the limited members, Wentwood sought a more than $1.7 million purchase price for the ownership interests, while Centennial Partners argued that $500,005.00 was the fair market value.  After a four-day jury trial and only 40 minutes of deliberations, the jury agreed with Centennial Partners and returned a favorable verdict.  The jury found that the limited members had breached the Operating Agreement and violated their duty of good faith and fair dealing owed to Centennial Partners.  As a result, the jury awarded Centennial Partners $470,000.00 in damages.  The jury also agreed with Centennial Partners that the fair market value of the limited member interests was $500,005.00, resulting in Centennial Partners only needing to pay $30,005.00 for the limited member interests.  The more than $1 million positive capital account balance remained with Centennial.
• Representation of Downtown Action to Save Housing (D.A.S.H.), a Seattle-based non-profit affordable housing developer in a Year-15 Low Income Housing Tax Credit (“LIHTC”) dispute with Investor Limited Partners involving three affordable housing communities, and three separate but nearly identical partnership agreements, each of which contained a detailed buyout option that would allow D.A.S.H. to purchase the entire ownership interests of three limited partners at the end of the 15-year Compliance Period.  When D.A.S.H. attempted to exercise its buyout options, the Investor Limited Partners (“Investment Partnerships”) refused, despite D.A.S.H. having met all of the requirements of the buyout options, including relying on the assessment of fair market value by an appraiser all parties had agreed upon.  According to the Investment Partnerships, they refused D.A.S.H.’s buyouts because they did not agree with the fair market valuation of their ownership interests in the three Partnerships.  The Federal Court ruled in D.A.S.H.’s favor after discovery on summary judgment, determining that the Investment Partnerships had breached the partnership agreements by failing to sell their ownership interests to D.A.S.H.  According to the Court, “[n]either the partnership agreements nor the buyout options entitled the Investment Partnerships to subjectively disagree with the appraised [fair market value] of their interests and then hold out for what they believed to be a more accurate price.”  The Court further ordered the Investment Partnerships to transfer their limited partner and special limited partner interests in each of the three Partnerships to D.A.S.H. for a collective $70,000.  A trial to resolve the damages caused to D.A.S.H. by the Investment Partnerships’ breaches of the partnership agreements is still pending.
• Represented Arch Apartment Management, LLC in a Year-15 Low Income Housing Tax Credit litigation with Wentwood Capital Advisors. Arch was attempting to acquire the Investor Members’ interests in the Company, pursuant to its purchase option in the Operating Agreement. However, the Investor Members were demanding more than $1 million for those interests. Our team argued, and the Court agreed, that Arch was to pay only  $44,911, which would place the Investor Members in the same after tax cash position they would be in if the Company sold the underlying Apartment Complex at the appraised fair market value. Shortly after Arch prevailed on these and other important LIHTC industry issues, the Court also issued an order in a related case, which the Investor Members had filed in retaliation against two of Arch’s owners individually.  Pursuant to that order, the Investor Members were required to pay attorney’s fees and costs, thereby confirming for Arch and its owners that the retaliatory suit claiming breaches of fiduciary duty and self-dealing was entirely frivolous and without merit. The district court decision was affirmed by the Minnesota Court of Appeals.
• Representation of CommonBond Communities, a long-standing non-profit affordable housing developer in Minnesota who was looking to exercise a right of first refusal to purchase its partner’s interest in an affordable housing project for seniors at a fixed and discounted price, based on the project’s existing debt and taxes owed.  CommonBond’s limited partner in the development project sought, instead, to require CommonBond to pay market value for the property, thus putting the future of the senior-based affordable housing project in jeopardy by making it too expensive to continue to operate.  We demonstrated to the court that the original contract, drafted twenty years prior, had a mutual mistake in it, which lead to the court’s ultimate decision to reform the contract to allow CommonBond to buy the property at the lower price and continue to operate the senior home.
• Representation of Pelican Rapids Leased Housing Associates I, L.P., a local partnership and affiliate of a large, national affordable housing developer, in a “year 15 exit dispute” involving an investor limited partner’s refusal to consent to a refinance of project debt. The refinance was needed to avoid the Partnership’s default on its long-term debt financing obligations that were scheduled to mature, but the investor limited partner was refusing consent for the refinance and demanding to be paid the return of its invested amount in exchange for exiting the partnership to nullify the need for its consent for a refinance.  We successfully obtained an injunction allowing for a short-term refinance without the investor’s consent, which was then followed approximately six months later by a favorable summary judgment order finding that the investor limited partner had unreasonably and unlawfully withheld consent to refinance as a means to obtain rights that it otherwise did not have (i.e., a forced buy-out of its interests).
• Representation of Cottages of Stewartville and Stewartville Development Corporation, a local partnership and affordable housing developer, in a “year 15 exit dispute” involving an affordable housing project. The dispute arose after the investor limited partner fully exhausted the tax credits available to the partnership and sought to exit the partnership with a forced sale of the project by unreasonably withholding consent to allow the general partner to refinance project debt.  Successfully obtained an injunction and court order that allowed his clients to refinance the project debt without the investor limited partner’s consent and prohibited the investor limited partner from involuntarily removing his client from the partnership.  Following the injunction, the case proceeded to a trial more than a year later.  Ultimately, the Court ruled in favor of our clients and confirmed that the investor limited partner had unreasonably withheld consent to refinance.