Joint Venture Finance
Typically, this involves 100% funding by an investor or partner, for a profit share. We have numerous lender Joint Venture partners & investors who will consider 100% funding the right project, with the profit share amount determined by the individual lender’s assessment of risk, amongst other things. Interest will also be charged on the monies utilised, and charged against the drawn sum each month.
The developer will be responsible for funding all “up-front” costs (i.e. before the land acquisition) including the planning consent and professional reports, though these can usually be charged back to the scheme. The investor first advances their funds for the acquisition, and then typically cover each and every cost thereafter.
Naturally, a developer needs to be sufficiently experienced and able to demonstrate their success via previously delivered schemes.
Given their unique nature, Joint Ventures are a kind of partnership and are all agreed on a case by case basis.
What are the Key Features of a Joint Venture Financing?
100% of costs covered (except any necessary upfront professional reports).
The project needs to show a minimum profit margin of 25% on GDV (excluding finance).
Minimum project costs of £500k, with no upper limit.
Interest rate, fees and profit share on a case by case basis.
Net Profit shared between the developer and the JV investor.
What are the Joint Venture lending criteria?
Detailed planning consent must be in place.
Multi-unit schemes considered.
Residential schemes preferred.
Commercial and mixed-use schemes can be considered with a pre-sale or pre-let.
Personal Guarantees usually required.
JV partner will expect control of the Special Purpose Vehicle (SPV) by being a majority shareholder.
Developer and JV partner will be Directors of the SPV.
The developer will need to demonstrate successfully delivering previous schemes.
Specialist solicitors will create a Joint Venture contract specifying the roles of the respected parties.