Are you a Property Owner, Developer, Land Owner, Real Estate Financier, Architect, Engineer, or Contractor? Are you a Real Estate Agent? Ever heard of a Joint Venture? In our Joint Venture Guide (JV), we look at the?
Background
Developing a real estate project (DREAM) from scratch could take up to 7 years. It is a real journey that is expensive, time-consuming, and complex. As a sponsor or developer, you must wear many hats and be an expert in up to 12 areas under Design, Build, Sell, and Exit. To deliver a winning joint venture, you will need to:
- Be a DEAL MAKER and master negotiator; any slip-ups or mistakes will cost you money.
- Have a great real estate IDEA OR DREAM. This idea must be unique, offer a competitive advantage, and be financially/technically viable and valid for a good 20 years.
- It would be best if you found or owned prime land (defined as investment grade)
- get the best architectural design possible by an amazing designer,
- Get approvals and any required licenses from up to ten government agencies (NEMA, National Construction Authority, County, etc)
- Know of and have access to the right technology (e.g. construction/building)
- Be able to attract and bring together many local or international partners with the right expertise and inputs.
- Have DEEP POCKETS or arrange long-term financing from Banks and other lenders
- hiring engineers, project managers, and a contractor to build this dream
- Project Manage and Deliver the DREAM project on time and under budget and
- Market or Operate. Set up a Sales and Marketing team to sell or rent out the property to customers If the project is a Design-Build-operate, find an operator, e.g., a supermarket, hotel, or Hospital vendor
- Divide or payout profits from the project
- Finally, leave/exit the project Sadly, it’s rare to be a master deal maker or have deep pockets to finance all the right inputs, expertise, and partners.
Challenges of Joint Ventures
Please check out this article that discusses in detail 9 problems or challenges in using a JOINT Venture model to develop a property in Kenya A JV is like a marriage and preparing and proactively avoiding problems is a major factor of success.
5 Reasons Why use Our Winning Joint Venture (JV) Program to Develop a Kenyan Property using
- Kenya is just Right. Kenya presently has the right environment and significant global interest and attention. The last 5-years have seen a robust Kenyan real estate sector with amazing returns exceeding 20.0% p.a. for investment-grade real estate. This has attracted global interest in Kenya as an emerging market, and this has seen the development of an amazing array of commercial buildings, schools, hotels, villas, mansions, and apartment complexes, among others.
- Booming Real Estate Certain real estate segments are booming in Kenya, and there is great demand for rare investment grade land to put up low-cost housing, middle-class apartments, and specialty commercial and industrial real estate like hospitals, eateries, and schools.
- Access Low-interest International Capital. Real estate is very capital intensive and Execution requires very deep pockets and access to cheap long term capital that is better delivered with a winning Joint Venture
- Get Cheap Funds from long-term investors. The real estate project is not suited for expensive commercial bank financing. The project cycle is long (minimum 5 years) from conception, design, build/construction, and sale of units, and this horizon is great for certain long-term investors and certain special purpose investment vehicles.
- Access Expertise. Today’s real estate requires expertise that is not available locally. A JV can allow you to attract a Chinese Contractor, Access North American Technology, among others. The project process is complex, requiring licensing, expertise, and skills that are best delivered by a local or international team. These include cheap long-term finance, technology, Ideas, Connections, and customers among others.
A Joint Venture (JV) can bridge the gap and enable you to tap immense local and international opportunities and resources.
Is a Joint Venture Right For You? – 5 Important questions
A joint venture has many benefits but is also laden with many challenges. A Joint venture will allow you to access vital inputs and components that may deliver a successful real estate project. Any three (yes) answers to the following 5 questions means a Joint Venture is right for you
- Do you own or can access PRIME industrial-grade land?
- Do you have a “DREAM real estate idea or concept” that offers a competitive advantage, amazing success, and can be implemented on the PRIME LAND
- Do you want to develop 1 and 2 above but lack the required inputs or resources?
- Are you open to working with other partners in your quest to develop 1 and 2 above
- Do you want to access local or international capital, technology, or ideas to deliver the DREAM project?
Liberty homes can help create a successful winning joint venture between diverse local and international partners. A partner must have one or several of the required inputs for a real estate project. We connect Developers, Land Owners, Land Bankers, Real Estate Financiers, Clients, Architects, Contractors, Banks, and other players. Consider working with Liberty Homes as your partner for all types of Joint Ventures( JV)
The Liberty 10 Step WinningJoint Venture Process
We use the 10 steps to create our winning joint venture.
- Project IDEA(s) or DREAM– Everything starts with your DREAM, vision, or idea(s)
- Project Proposal. Using your idea and our site assessment idea we shall conduct a high-level Pre-Feasibility Study (PFS) to establish and shortlist the best project idea. We will look at the Financial, Technical, and Economic Viability of your DREAM project, and paint a financial picture. We shall also detail locational advantages and factors, best use of the property, high-level project costs, revenues, and the resulting potential returns from such an investment, The PFS will also list potential project partners that may add significant value to the project.
- Partner Search – The Project Lead/sponsor will scout, approach, and negotiate with potential local or international partners. The key here is to attract and negotiate for the best value, and match to fit the project. Partners may include local and international Banks/Financiers, Contractors, Project Managers, Project marketers, etc. For example, a commercial Build-Own-Operate (BOO) specialty children’s hospital project may need local or international hospital operator(s) that may include Kenyan partners like Gertrudes Garden Children’s Hospital, or Karen Hospital among others.
- Full Feasibility Study – With major partner(s) on board and greater clarity on the Dream the team will now conduct a much more detailed full feasibility study and deep dive. This will be to showcase:-
- The proposed concept, budget, revenues, roles, Entry, Exit, and profit-sharing between the two parties, The following are some of the common clauses found in a JVA:
- The capital obligations of each party,
- The partnership management structure,
- The rights and responsibilities of each party,
- Exit rights and transfer rights with respect to the sale or transfer of membership interests in the JV,
- The downside protection for the land value contributed by the landowner, and
- The profit-sharing mechanism.
- Joint Venture Agreement (JVA) – The Parties will now enter a JVA subject to :-
- Legal Due Diligence by Parties– The landowner will avail copies of the land title deed and deed plans for verification and parties will conduct the required due diligence that will include a title search to establish the authenticity and establish that the land is free of any encumbrances. ,
- Signing of Agreements – Once due diligence is complete parties will execute a Joint Venture Agreement (JVA). .
- Formation of a Special Purpose Vehicle (SPV) – Upon signing of a JVA, Parties will create an SPV. a company registered as a Private Limited Liability Company (LLC) or as a private Limited Liability Partnership (LLP) at the registrar of companies. With the SPV in place, Parties will inject their required contributions and the Landowner will assign/transfer the Land to the SPV. Other Parties will inject expertise, capital, and other inputs and the SPV will now fully be in charge of the project’s next phases.
- Project Design and Approvals. – The SPV will commission the full design and secure approvals of the Project Design with regulators.
- Ground Breaking and Construction – The SPV will hire a project team that will include an architect, QS, project manager, engineers, and other consultants and does a big groundbreaking ceremony that will set the stage for the start of the construction phase of the project. The project team will oversee and deliver the project through to completion,
- Project Marketing – If the project is a sale of real estate apartments or units then upon groundbreaking then a marketing team will also start the aggressive sales and marketing of the project
- Project Completion, and Sharing Profits – Once construction is complete, the partners (landowner, developer, etc) share profits in accordance with the terms of the JVA, and the profits shared may be in form of cash or units such as houses or apartments.
Seven Amazing Benefits of a Liberty Winning Joint Venture
Joint ventures can be a source of financial fulfillment for partners, and benefits include;
- Higher Profits Quality and Success
- Higher bargaining power and Increased Capital Capability – In a JV, partners can execute a much bigger project than if they would go at it alone. A very big real estate project. Everything starts with seed capital. Partners can then contribute capital, land expertise, etc, and then be able to access more sources including debt. This considerably expands its financial capability in capital-intensive real estate development. Furthermore, with seed capital, the partners are able to access debt capital easier than they have,
- Development expertise – The developer in a JV provides development expertise in terms of concept development, design, and project management; and oversees the project to completion. With the right partner, the landowner is relieved from the day-to-day hustle of supervising a project and assured of professional workmanship,
- Access to Sales and Market – Selling real estate is now as important as having the best designed and best-constructed project. Partnering with a reputable real estate firm like Liberty Homes will ensure the shorted and timely sale or rental of the real estate products (homes, apartments, etc) to the target market, This is Key to getting the best returns to a project,
- Access to partial liquidity for a landowner without having to sell the entire land – In a JV, the landowner can be paid something upfront so as to meet their cash needs without selling the land
- Preferred Returns – Landowners can get either a preferred or guaranteed minimum return. This will ensure that in the event that the project does not materialize, they do not lose the value of their land, and
- Shared risks and gains – Ultimately, a successful JV will generate the expected high returns for both partners. A partnership also enables the spreading of economic and other market risks that might result from undertaking any worthy real estate investment, and that would otherwise be borne alone.
Next Steps
For more information or to explore a JV for your project, please
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