What are Joint Venture Partnerships?

By: Lucent Group   09/25/2015
Keywords: Property Investment, Land Investment

The collaboration of talent and capital is, arguably, what makes the world go around. JVPs in strategic land development are a good example of how that works.

Almost all successful business ventures have at their core a talent for collaboration: a sharing of ideas, goals, risks and rewards between parties that enable individuals to accomplish more together than they would if they went about the enterprise alone. This basic concept is fundamental to what forms joint venture partnerships (JVPs).

A very clear application of a JVP and its benefits would be in something such as joint venture land opportunities. This would be in a scenario such as strategic land, where the JVP would convert raw UK land through all the required steps to establish build-ready plots for homes and commercial enterprises. Capital and a broad variety of skills and experience are needed throughout the process. An individual rarely would possess all of these things - sufficient financing and expertise - and therefore many would-be investors would be excluded from participating in the significant asset growth that often comes from land site assemblies. It is JVPs that make this possible.

Joint ventures come in different models, including the following:

Company limited by shares (CLS) - A very common form of a JVP, a CLS company divides share capital into shares of fixed amounts and can subsequently issue them to shareholders. Some companies encourage share ownership by staff, which brings a sense of involvement in the ultimate success of the venture.

Limited partnership (LP) - Partners share directly and proportionally in profits and losses.

Limited liability partnership (LLP) - New since 2000, this is a hybrid that combines the safeguards of a limited liability corporation and the flexibility of a partnership.

Private finance initiative (PFI) - This is most often a way of funding public infrastructure, such as schools and hospitals, with private capital. PFIs are somewhat controversial due to the sense that it underplays public deficit and debt when it is often a more expensive form of borrowing for public entities.

Company limited by guarantee (CLG) and industrial and provident societies (IPSs) - Typically used for non-profit distributing and commonly a source of financing for housing associations.

Joint venture partnerships engaged in raw land and site assembly enable investors to basically buy into local knowledge. This is because the strategic land developers do much of their work “on the ground,” studying local economic conditions, assessing locations, negotiating purchases, presenting to local planning authorities, designing a site and building the infrastructure of roads and utilities. The developers also have relationships with homebuilders, who ultimately buy the house lots and build homes to sell to homebuyers.

Investors should always consider the broad sweep of considerations relative to any investment. The pressing need for housing in the UK is certainly a driver that makes property and raw land more valuable than ever before. But for an objective perspective, investors are encouraged to work with an independent financial advisor who can assemble all variables into a pragmatic, investment-decision making process.

Keywords: Land Investment, Property Investment

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