A joint Venture is a financing method for construction projects where the land owner contributes the land and a financier contributes the funds to realise a real estate project .
The land owner and financier agree on the sharing percentage based on negotiations between the two parties. www.a4a4chitect.com offers Joint Venture financing advisory for land owners who would be interested in financing their construction project through this method. a4architect.com also lists lands available for a joint Venture financing here http://www.a4architect.com/land-4-sale-joint-venture/
Special Purpose Vehicle.
A Special Purpose Vehicle limited liability type of company is formed where the land owner transfers the land to the company then the financier opens a bank account with the company name and transfers construction funds into the SPV bank accounts. This company now owns the land and the buildings being constructed and once the project is over and both the land owner and financier take ownership of their shares, the company is usually dissolved afterwords.
Land size and location.
Its important that the land owner has the land in a very prime place in proximity to a major town so as to assure the financier that the project, once completed, will attract end user buyers and renters. In most cases, joint venture financiers end up selling their share of the project while the land owners remain with hteir share and rent out, or sell part and rent out the rest.
The larger the land, the more attractive it is for financiers. For middle class housing, at least 10 acres and above is preferred. For CBD, Upper Hill, Lavington, Ngong road areas, 0.5 acres and above is preferred. For high class housing eg Karen, Runda, at least 5 acres and above is most preferred by financiers.
a4architect.com compiles land requests from joint venture financiers and links up land owners with potential financiers for joint venture projects.
The major benefit of a joint venture is that it enables a land owner realize income from developing their land without the land owner necessarily having to put in capital.
The average joint venture agreements usually gives the land owner around 20 to 35% of the housing units while the rest goes into financing the construction cost of the project.
Each project is different depending on the calculations that yield the sharing ratios between land owners and joint venture financiers. A4architect.com offers advisory services to land owners so that at the negotiating table with the financiers, the deal goes on smoothly without either party feeling shortchanged.
Without a joint venture financing agreements, land owners are required to either raise the cash for construction from their own sources and savings or borrow loans from banks. Raising millions of shillings required to construct is a tall order for most land owners. Borrowing millions of shillings from banks also require that the land owner raise at least 30% of the construction cost, which run into millions of shillings, and also have the ability to service monthly interest, also running into millions of shillings. When land owners find themselves in this dilemma, the next best option becomes a joint venture.
Completed Joint Venture projects in Kenya.
Everest Park Apartments , Athi river.
Runda Park Apartments, Kiambu road.
Kigali Batsinda, Kigali
Westpoint Heihts, Kikuyu town.
Architect Francis Gichuhi Kamau.