Ayle Property :: Property Development & Joint Ventures

PROPERTY DEVELOPMENT & JOINT VENTURES

Real estate projects often utilize joint ventures as a means of obtaining equity funding. Joint ventures refer to an entity created for co-investment purposes by multiple parties, which may include general partnerships, limited partnerships, and limited liability companies.

A joint venture established for the purpose of real estate development may involve multiple parties, such as the landowner, developer, funder, and eventual occupant of the completed project, or a combination thereof. It is important to carefully evaluate the benefits and drawbacks of each option, as there is no one-size-fits-all solution. Tax considerations are often crucial, and it is recommended to seek expert advice on the tax implications of the chosen joint venture scheme.

Joint ventures can take on varying degrees of complexity, ranging from a simple arrangement between the landowner and developer to more elaborate agreements involving financiers or equity investors. Landowners situated in prime locations often lack the necessary capital or expertise to undertake real estate development independently, which may not align with their objectives.

Instead of assuming disproportionate risks, seeking a joint venture with a reputable developer or equity investor is a prudent option. This allows the landowner to engage in the development while mitigating potential risks.

Regarding the sharing of benefits, the parties have a number of options available, such as:
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...

AYLE Property Development possesses vast expertise in joint venture real estate development, covering the development of various types of properties such as residential villas and apartments, commercial office blocks, and other commercial developments. We offer practical advisory skills to help navigate the intricacies associated with real estate joint venture schemes, along with an unmatched creative approach to problem-solving.

Typically, landowners in prime locations lack the necessary capital and technical expertise to engage in real estate development on their own. Furthermore, pursuing such projects may not align with their objectives due to the substantial costs involved in construction, as well as their lack of development skills and technical know-how.

In such situations, it is advisable to consider a joint venture with a reputable developer or equity investor to mitigate risks. In many cases, the landowner's contribution may be solely the land, while the developer is expected to provide the necessary financing for the development, including covering approval costs and hiring professionals like architects, environmental consultants, quantity surveyors, service engineers, and lawyers.

Some of these professionals may be willing to receive compensation in the form of shares in the Special Purpose Vehicle (SPV) implementing the project or a portion of the units equivalent to their agreed fees.