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Why is there a financial benefit of entering a JV compared to selling your development site upfront?
A JV is a lower risk strategy to the developer, therefore with reduced risk enhanced prices for the land can be realised. However, the overall development risk is still the responsibility of the developer which protects the landowner's interest. The landowner’s risk is weighing up less money now through an upfront site purchase or significantly more later.
ADDIS HOMES recently appraised a site where the landowner was offered 30% more through a JV compared to the current market value of the site. With a profit share agreement, the overall return to the Landowner could also further increase.
There are many options on how to structure the JV in terms of risk appetite and timing, therefore if you would like to learn more please get in touch.
The emphasis of a Joint Venture (JV) comprises the Landowner contributing the site into the JV. ADDIS HOMES will then finance the entire build process and be responsible for the development risk.
Profits are then either shared based on an agreed profit split. Or, a fixed site value can be agreed at the outset which is paid back to the Landowner first through the resales with any remaining profit entitled to ADDIS HOMES. The latter being a reduced risk strategy for the landowner whilst also increasing the site value compared to an upfront purchase of the land.