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Joint ventures (meaning an entity formed for co-investment by multiple parties, including general partnerships, limited partnerships, and limited liability companies) are a common vehicle for providing equity funding for real estate projects. As an Investor becoming co-owner in development of project, will give very high returns on the Investment.
In order to make a successful Joint Venture structure, we will ensure the following factors:
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- Providing the partners with appropriate risk-adjusted returns if the deal is successful.
- Providing a mechanism for restructuring and salvaging the deal if things do not go well as expected.
The economic model for most joint ventures involves some combination of the following elements:
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- A return of capital, typically with some minimum threshold or preferred returns, to the capital providers;
- In certain cases, some guaranteed payments to service providers depending on the nature of the project and the scope of the services provided; and
- Negotiated sharing of the remaining distributable amount among the joint venture partners based on the relative risks they bear and the value they add through their entrepreneurial efforts.
We perceive that there will be many land investment opportunities and the scope for development on those will be better suited to developers instead of ourselves, due to the large capital outlay expected in construction, local expertise reqd., development skills expected, etc.
So, getting into a JV must have a good payback for you. Whatever you lack is usually the reason for entering into a JV.
