Real Estate Development Joint Ventures
Real Estate Development Joint Ventures are often created where a land owner who owns land free and clear of any loans enters into a joint venture agreement with a developer who is knowledgeable, experienced, and has a successful track record of developing the type of project proposed. A joint venture may be structured to develop condominiums, a planned residential development, apartments, or a commercial property. A joint venture may involve the creation of an LLP, a limited partnership, or other legal entity.
Joint ventures always involve risk, so it is always prudent to be represented by an experienced real estate attorney and real estate consultant before any documents are executed. While real estate development joint ventures involve risk, they can also be highly profitable for both joint venture partners.
Following is a description of a commonly structured joint venture for the development of a condominium project or a planned residential development. Note that it illustrates only one type of arrangement. Joint ventures are always negotiable between the parties which is why both parties should have professional, experienced representation.
A typical real estate development joint venture includes:
- The landowner contributes the land to the joint venture entity.
- The developer agrees to personally guarantee the contribution loan made by the bank.
- The landowner does not provide a personal guaranty to the construction lender.
- The landowner receives a priority return by receiving a fixed amount of dollars from the sale escrows of each home sold based on a formula.
The landowner risks his or her land while the developer is at risk by providing the construction lender a person guaranty.
We have represented land owners and home builders during our more than 35 years of operations. Please contact the founder of Pacific-Realtors. net, Michael Chulak if you would like a no-cost initial consultation.