Dilution Formulas in Real Estate Joint Venture Agreements

An article on dilution formulas in real estate joint venture agreements, written by Holland & Knight real estate transactional attorney Stevens A. Carey, was published in ALI CLE's January 2025 issue of The Practical Real Estate Lawyer. The article was updated on Oct. 31, 2025, for the ABA LLC Institute held in Washington, D.C.

The article is intended to provide an organizational framework to better understand dilution formulas and some surprising outcomes they may cause. While directed to real estate professionals, those doing non-real estate ventures may also find the article of interest. (Many, if not most, of the problems illustrated would also occur in a "straight-up" venture, in which all contributions and distributions are made in accordance with venture percentages.) Of particular interest may be the comparison of value-based formulas and capital (contribution) – based formulas when profit distributions are in a different ratio than the distributions that return capital (and Appendix B, which was not in the originally published article, may be useful information to many).

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