Funding joint ventures, and the principles behind them, have been used for many years in the property world. And as the market continues to change, they are becoming increasingly important, frequently used and relevant, especially for small- and medium-sized investors and developers.
This trend looks set to continue over the coming years. The spirit of the joint venture partnership is becoming almost omnipresent thanks to recent and ongoing regulatory, economic and technological changes.
But first, what is a joint venture, and specifically what are funding joint ventures in property about?
A ‘joint venture’ is an arrangement between two or more parties to co-operate in order to achieve a common set of goals, outcomes or objectives.
Each party contributes valuable components, for example (but not limited to) finance, land, time, and skills. Efforts are underpinned by aligned incentives. The result should be greater value and impact for all parties involved than they would have had access to alone.
The joint venture partnership model is, and has long been a commonly used approach in property, in particular in relation to funding. This is partly because property deals require, attract and are capable of generating substantial amounts of cash. And it is partly because the investors interested in making money from property often lack the skills, time or access to other resources such as land needed; meanwhile, the parties with land, skills and time rarely have enough funding to achieve everything they want to, alone.