MINNEAPOLIS – October 16, 2019 – Winthrop & Weinstine, P.A. has helped Centennial Partners, an affiliate of Milwaukee, Wisconsin based real estate developer Wimmer Communities, secure an important victory in a Low Income Housing Tax Credit (LIHTC) Year-15 Exit dispute.
Centennial, LLC owns and operates a 97-unit affordable housing development for senior citizens in Oak Creek, Wisconsin. In July 2017, Centennial Partners sued ORC Tax Credit Fund 10, LLC and SCDC, LLC (“Defendants”), both managed by and affiliated with Wentwood Capital Advisors, LP, following Wentwood’s refusal to sell the Defendants’ limited member interests in Centennial to Centennial Partners. Prior to trial, Wentwood claimed that the sale of the Defendants’ ownership interests in the Company to Centennial Partners was a capital transaction that required the return of a more than $1 million positive capital account balance to the Defendants in the form of a cash payment. In December 2018, the Milwaukee County Circuit Court disagreed and granted summary judgment to Centennial Partners on this important issue. At trial last week, Wentwood sought a more than $1.7 million purchase price for Defendants’ ownership interests in the Company, while Wimmer argued that Centennial Partners should have to pay $500,005.00 for the ownership interests. Wimmer also presented claims for breach of contract and breach of the duty of good faith and fair dealing, seeking no less than $395,000.00 in damages for Centennial Partners.
Following a four-day jury trial last week and only 40 minutes of deliberations, a jury of 12 Milwaukee County residents agreed with Wimmer and quickly returned a verdict in favor of Centennial Partners. The jury found the Defendants breached Centennial’s operating agreement and also 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 Defendants’ limited member interests is $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 will remain with Centennial.
“Wimmer Communities is a six-generation, family business that has been building communities throughout and around Milwaukee County for decades,” said David Davenport, a shareholder at Winthrop & Weinstine and lead attorney for Centennial Partners. “We are thrilled that we were able to bring about a positive resolution for the Wimmers and for the community. But, Wimmer Communities and Centennial Partners are not alone in facing these challenges because the LIHTC industry continues to change and preservation challenges exist around the country. Thus, we expect to continue to see more disputes like this, especially as limited partners continue to become more aggressive in the positions they take at Year-15.”
Wimmer’s Executive Vice President, John Wimmer, shared: “We’re thankful for the experience and support of our team at Winthrop & Weinstine. The firm’s tireless work did more than help us keep our business in the family, it helped set up a bright future for Centennial Partners – and also will protect us for years to come.”
Year-15 Exit disputes are often hyper-specialized and often involve parties whose objectives have changed due to changes in ownership structures since inception of the LIHTC partnerships. Adding to these complex issues is the fact that, because it is still a relatively young industry, there is very little case law involving LIHTC partnerships to cite when resolving these disputes. Since 2013, Davenport has led litigation and other efforts for general and managing partners in disputes in 14 states in more than 32 cases and other matters that have involved more than 75 LIHTC developments.