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Co-Development and Joint Ventures in Commercial Real Estate

by | Nov 25, 2019 | Blog

Commercial real estate (CRE) joint ventures are becoming more popular and more attractive to investors. Also referred to as co-development projects, these funding and acquisition arrangements offer real advantages for companies and individual investors in the commercial real estate market. Here are some things you should know about joint ventures and their value for your investment portfolio.

Most Large-scale Projects Are Joint Ventures

In most instances, larger CRE projects are the product of two or more parties that have agreed to work together to achieve their goals. For example, real estate operators and construction contractors typically work with investors or commercial funding sources to ensure adequate financial support for their activities. In this way, joint ventures combine funding and expertise to ensure the highest potential for success in the fast-paced real estate market.

Structuring Your Real Estate Joint Venture

Depending on the size of the project and the type of players involved in these arrangements, a limited liability company or LLC may be set up to create the joint venture and to ensure that all parties to the project are represented. A joint venture agreement typically includes information that may include the following:
  • Information on the management and control of the project, including day-to-day oversight and any required reports to be made to the other parties involved in the arrangement.
  • The precise amounts of any capital contributions to be made by investors, funding companies and other parties and the dates on which these disbursements are expected.
  • Distribution of profits from the project.
  • Clear explanations of the proposed ownership of the project after it is completed.
  • Details on when the joint venture will end and how the LLC or other business entity will be dissolved at its conclusion.
Working with a company that specializes in commercial real estate funding can help you make the most appropriate moves when planning your joint venture and preparing to embark on your project.

Advantages of Joint Ventures

Joint ventures offer a number of real advantages for construction contractors, real estate developers and for investors:

  • Contractors and developers can access the cash they need more easily by allowing investors an added degree of control and profit-sharing through a joint venture project.
  • By participating in a real estate joint venture, investors and companies may be able to engage in projects that would otherwise be impractical or impossible under current regulations. For example, joint ventures allow companies to work with local contractors in geographical areas in which they have little or no experience.
  • Joint ventures also distribute the risk more evenly among all parties to the project, which can be a strong selling point for investors who want to work with experienced contractors to complete their real estate development projects.
In many cases, alternative lending companies can provide access to joint venture CRE projects for smaller investors. This can often open up avenues of opportunity in the financial marketplace for you and your investment portfolio. At ReProp Financial, we are a leading source for direct commercial funding in California and in many states in the western half of the United States. We offer unique and profitable opportunities for investors who want the security of real estate and the potential for higher-than-average earnings in the financial marketplace. To learn more, call us today at 1-800-444-2948. At ReProp Financial, we are here to serve you.
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