Property Development & Joint Ventures

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.

Joint Venture set up for development purposes might involve, for example, the landowner, the developer, the funder and the ultimate occupier of the completed development, or a combination of these. No one scheme is always appropriate, and the advantages and disadvantages of each option should be considered carefully. Often times, taxation will be of key consideration, and specialist advice should be obtained with regard to the tax implications of the chosen scheme.

The simplest joint ventures involve the landowner and the developer. Others will involve the land owner, the developer and financier or equity investors.

Invariably, most land owners at prime locations do not have the capital or technical wherewithal to undertake real estate development on their own. Moreover, this might not be suited to their objectives due to the huge capital outlay expected in construction, lack of technical expertise, lack of development skills etc.

In such cases, instead of taking disproportionate risks, it is always advisable to seek a joint venture e.g. a reputable developer or equity investor with whom the land owner can undertake the development.

In many cases, the land owner’s sole contribution is land whereas the developer will be expected to contribute the development finances including cash injections to defray approval costs and costs associated with hiring other development professionals like architects, environmentalist consultants, quantity surveyors, service engineers and lawyers.

Some of these consultants or professionals might also be willing to be paid in kind (that is getting shares in the SPV implementing the project or a share of the units equivalent to their agreed fees).

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In terms of benefit sharing, the parties have a number of options including:-

Co-owning the investment vehicles as shareholders in agreed proportions;
Selling the all units to third parties and sharing the profits;
Selling some units to recoup the costs, and sharing the remainder of the units in an agreed manner; or
Sharing the units in an agreed proportion with each party being at liberty to sell or keep its share of units.

At Property Boutique, we have extensive experience in joint venture real estate development including development of residential villas and apartments, office blocks and other commercial developments. We provide hands-on advisory skills to navigate the complex structures associated with real estate joint venture scheme and an unsurpassed creative approach in trouble shooting.

Our services include:

Connecting land owners to developers willing to undertake joint venture developments or others in off the market transactions;
Identifying development sites for developers or joint venture opportunities for investors;
Assisting property owners in joint venture negotiations;
Advising on the joint venture structuring and setting up appropriate vehicles;
Drafting and review of real estate joint venture agreements and other agreements;
Transfer of the property to the special purpose vehicle(s);
Advising on shareholding issues including shareholder agreements;
Offering brokerage, agency or management services in relation to the joint venture development;
Contract and joint venture administration including keeping minutes of all meetings;
Mediation of any disputes between the parties;
Negotiation of terms for third party service arrangements and agreements;
Advising on taxation matters and processing any stamp duty and tax exemptions;
Providing the partners with appropriate risk-adjusted returns if the deal is successful;
Providing mechanisms for restructuring and salvaging the deal if things do not go well as expected; and
Sourcing for suitable equity investors and/ or financiers.