A joint venture between an investor and an asset manager in a real estate transaction often offers both parties greater benefits than a traditional investment. The asset manager`s expertise is tied to the investor`s capital, allowing both parties to maximize their respective returns and obtain a larger share of the profits. It`s a win-win situation all around. There are two sides of a joint venture agreement in the real estate field, the operational member and the member of the capital. The member of the company is the party that acquires or develops the property and the member of the capital makes the money available. A real estate joint venture (see chart below) will include an investor who contributes most equity and an asset manager who invests the rest of the equity, usually between 2 and 10 per cent. This situation is advantageous for both the investor and the JV structure, since the Luxco 1 SPV, for example, may own SPV Luxco 3 or SPV Luxco 4, which are totally separate and eligible real estate asset pools. The other advantage of a Luxco security – especially in a portfolio of multiple assets – is that it creates a single checkpoint for lenders. There will be different provisions within the joint enterprise agreement that will live up to what will happen when, for whatever reason, the key man is no longer employed. They often refer to exit options for the investor and the rights to replace the key person with a specialist with similar experience. Buy, repair and sell a property together? Buying, repairing and renting a property together? Discover in a very concrete way the objective of this joint venture. In this way, both parts are clear and comfortable. The joint venture will then enter into an asset management agreement (AMA) with the asset manager, either directly or through a subsidiary, and in a property management agreement (LDC), often with an external property manager.
Of course, there is no perfect way to develop real estate or invest in real estate. It is always necessary to balance the pros and cons of any strategy, as it relates to the agreement. Let`s start by defining what a joint venture is. Investopedia.com: «A joint venture (JV) is a trade agreement in which two or more parties agree to pool their resources for the fulfillment of a specific mission. It may be a new project or some other business activity. In a joint venture, each participant is responsible for the profits, losses and associated costs. However, the entity is a separate entity, separate and separate from the other business interests of the participants. A joint venture agreement, also known as a joint venture agreement, is used when two or more business entities or individuals enter into a temporary business relationship (joint venture) to achieve a common goal. In January 2019, IPSX – the first and only commercial real estate exchange – was established in the UK, making an IPO a viable alternative to exiting the joint venture`s partners. One of the advantages is that issuers can also attempt to use the UK REIT system by providing them with effective tax treatment of rental income and capital gains.
Remember, joint ventures are not designed as long-term agreements. They are designed to serve a very specific and defined goal in the short term. There is a clear beginning and the end of all joint ventures. This type of detail should also be defined in the agreement. 2019 JanuaryStart of IPSX – the first and only commercial real estate exchange Scott Royal Smith is a longtime lawyer and real estate investor. He is on a mission to help other investors use their time, protect their wealth and create sustainable wealth. Via A. CRE Legal Contibutor: Ronald Rohde has more than ten years of legal experience in real estate transactions, leasing and investments. He studied at Cornell University and the University of Miami.