Many countries limit foreigners entering the domestic real estate market. In such cases, establishing a joint enterprise agreement with a national company is often the only way to enter the country. Landowners obviously have land and investors of course have money. This is a great opportunity to create joint ventures and create successful partnerships between skills, country and finance. We, the real estate developers, must always be attentive to these kinds of opportunities where we can sell our equity skills as part of a well-structured agreement. Another way to promote cooperation is through the conclusion of a contractual development contract (CDA) where two or more parties enter into a contractual agreement for the sole purpose of achieving development. The simple arrangement here is the attraction, because they are easy to set up and, from the point of view of responsibility, each party is responsible for its debts. For example, your joint venture may be with an architect and contractor and you may turn to investors for majority capital to buy and develop land. On this basis, the investor provides most of the financing and will likely need a greater share of any profit. However, if the joint venture cooperates well and uses its combined risk reduction and focus capabilities on supply, access to capital can be obtained through this proven balance sheet, since the joint venture is generally considered less risky for investors. In my life as a corporate property developer, we have purchased 4 hectares of land in a vast regeneration area of London. After taking control of this land, we turn to the Home Communities Agency (HCA), which owned a vast 110-hectare plot of land in the vicinity of our country, with the intention of securing their land for development. In terms of the financing and the resources needed to develop the joint venture, it depends on the nature of the work.
The degree of complexity, value and timing determines the type of arrangement to be made. For example, if you are doing short-term remediation work, without major structural changes, a joint venture development contract may contain a short-term bridge loan that will be repaid through the return on investment after the completion of the work and the sale of the property. Bridge loans are possible to cover the total cost of development, but this is unusual and they are more likely to be used for the difference between purchase and rehabilitation. The joint venture agreement must indicate the exact amount of capital contribution expected by each member. It must also indicate when this capital is due. For example, a capital owner may agree to contribute up to 25% of the capital required, but only if this contribution is made in the final phase of the development process (last money in euros). Joint ventures, often used in the real estate development sector, can be successful if they are duly constituted and if all parties clearly respect their commitments. They are mainly designed to share the skills or assets of the parties involved, but also the risks associated with the development of real estate.
These joint venture agreements can be used to obtain financing to make desired real estate development a reality.