What is Equity Joint Venture?
As an alternative to Mezzanine Funding, it is where the equity partner shares in the risk and profits. In general, prime funding is up to 65% of the Gross Realised Value of the project (GRV). This is normally obtained from a main lender, with the balance provided by the equity partner.
This allows funding for up to 100% of hard and soft costs and the interest is capitalised for the duration of the loan. The developer and builder must satisfy the equity partner of their experience in developing and or building similar projects. Development must be valued to final project value.
Situations where private equity or joint venture arrangement are most suite
- land owner looking to partner with an experienced property developer
- early stages of the project time line such as rezoning or approval
- development management experience, particularly for larger projects to demonstrate the ability to successfully complete the project
Private Equity / Joint Venture is particularly useful in situations where the project owner requires another party’s project development expertise and/or balance sheet position to progress the project to a mutually profitable outcome.