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Do All Joint Venture Participants Bring Expertise To The Investment?
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Expertise is critical to joint venture investments – from any participant.
Joint venture land development investors are largely involved to earn a favourable return on their capital. Most investments benefit from third party expertise.
Joint venture partnerships (JVP) between multinational companies and in-market owners of capital, brands or knowledge, are a proven successful formula. This is particularly evident in the global economy. The McDonald’s Corporation’s expansion to scores of countries, many in the developing world, has been monumentally successful because the company typically works with an investor-manager in each of those markets. The restaurant company understands how to effectively run its establishments, while the JVP ensures that customers, employees and regulatory agencies are working with locals who understand their region’s needs and interests.
Joint venture property funds can follow a similar model, but not all investors necessarily bring land expertise to the table. The nature of buying, repurposing (through the planning process) and reselling property absolutely requires that the team has expertise in those particular tasks. Indeed, successful independent real estate investors can amass significant wealth when they have these skills themselves or within their staff. But many joint venture participants only bring capital, not land-specific expertise, to the investment. The investment and the task to grow capital are left to one or more, but not all, parties in the investment.
Whether or not this is an optimally beneficial arrangement is subject to circumstance.
Consider two different joint venture land development investment scenarios:
cenario 1: Some but not all investors are the land specialists. A degree of trust needs to be established between all parties when some investors lack knowledge on how to make strategic land investments.
Scenario 2: An independent land investment advisor works collectively with joint venture participants. Because such advisors attract investors over time, they need to establish a track record that demonstrates their ability to maximise their returns to investors’ capital. That track record over previous investments is how they establish the trust that investors place in them to grow their assets.
The points of expertise required for strategic land investments are as follows:
1. Acquisition of land – Only properties that show strong and probable asset growth potential are considered. Sometimes the land tracts are held by several owners, which consequently requires acquisition negotiations on several fronts (not necessarily an easy task).
2. Site assembly – Achieve granting of outline planning consent by the local authorities, clearing the way for repurposing and building on that land. While this is typically understood in advance of the acquisition, the process needs to be managed carefully, working through the proper channels (e.g., submitting an optimal design) to a successful outcome.
3. Sale of the property – The moment at which the investment can provide a return on investment – according to the original joint venture asset growth goals – is when the investors benefit from their advisors’ expertise.
As should be clear, individuals wishing to learn more about a joint venture in strategic land should discuss their specific and overall investment goals with an independent, qualified personal financial advisor.
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