In commercial real estate, one firm cannot simply purchase and develop a project. Instead, one offers commercial real estate expertise, and the other provides capital. This is referred to as a “Structured Joint Venture.”
Usually, the operating member has real estate experience who takes the lead on the development and project management project. Meanwhile the capital member plays a passive role in financing the project. This agreement, however, can vary depending on the project.
This post explores what joint venture financing is and how it works.
The ownership structure of a joint venture can vary in many ways. The most commonly found structure is a limited liability company (LLC). There are other options too, such as partnership, corporation, etc.
How you choose the structure of ownership depends on the project’s individual needs. This is because the structure can have a significant impact on the responsibilities and rights of the members.
Joint Venture Agreement
Other than the joint venture structure, to bind a joint venture legally, an agreement must be signed by all the parties involved. Some crucial aspects of a JV agreement include:
- The goals and plans of the joint venture
- What assets/resources will each party contribute to the venture
- Profit split
- Responsibility management
- Duration of the venture
- Exit strategy
- How various emergencies will be handled
Choosing the Right Partner
While it’s proven that joint ventures can be advantageous for all the parties involved, it also comes with significant risks. Choosing the wrong partner can sink the joint venture while depleting your resources.
Both the partners MUST be on the same page regarding the project’s business ethics, risk tolerance, timelines, and other important factors.
Global Capital Partners Funds has highly experienced senior partners that have spent many years working for multiple industries. They will guide you on whether structured joint venture financing is the right option for you and bring some valuable assets to the venture.
When it comes to delegating business responsibilities, there is nothing obvious or understood. It’s important for all the parties involved to discuss who is best suited to handle what operations or responsibilities.
This will prevent misunderstandings while clearing everyone’s role in the venture.
A structured joint venture is an ideal financing solution for many businesses. It’s better than traditional loans since it doesn’t involve the worry of repaying the lender. Moreover, an investor often brings a lot more to the venture, such as adding value and credibility to your venture, than just providing capital.
The key is to choose a partner that provides joint venture financing while being a good fit for the project. Global Capital Partners Funds has proven to be a reliable investor with least complications and risks for all joint venture financings in NY.
Visit their website for more information.