In this evolving economic climate, we acknowledge that financing deals has become significantly more challenging. However, at SVN Rock Advisors we have the connections to help you access financial resources.
One of our favourite ways to structure the deal so that the lender, developer, and partner win is Building Apartments with a Joint Venture Partner.
What is a Joint Venture
A joint venture (JV) is a collaboration between two or more business entities for the purpose of starting a new business activity. Each party contributes assets to the joint venture and agrees how to divide up income and expenses.
Where a Joint Venture Fits In
Fundamentally, a joint venture partner is needed when a developer does not have the necessary funds or expertise to complete a project. However, they do have the construction know-how and confidence to be successful.
The developer’s motivations to enter into a joint venture are these:
• The passion to build apartments
• The need to have a partner who has experience building or funding apartment projects
• A partner who will share the risks
• A need to maintain some liquid capital by finding alternative sources of equity for their project
• The drive to learn as they proceed
• The desire to build and/or strengthen relationships
From the investor’s point of view, a competent developer can fill in the missing pieces in their quest to build apartments. They have:
- The passion to build apartment buildings
- The desire to remain a passive partner
- The need to expand their portfolio beyond existing stock
- The desire to invest in a market with a proven track record
Even though much of a JV is about formulas, sharing data, and getting studies done, it’s the relationship between the partners that will determine its structure and how smoothly it proceeds.
