- 9th May 2022
- Posted by: DMM
- Category: Joint Venture
Placing 100% Joint Venture Funding is not an easy task, but this case study shows that, with the right project and the right team, even multi-million pound projects can be 100% funded.
In this case study for 100% joint venture funding, the experienced team had found a great opportunity but didn’t have equity availble to fund the project with senior debt finance.
The subject site in Putney, London, was being used as a retail business and had planning permission for nine, new build, residential units totalling some 6,000 sqft. These residential units included 8, one and two bedroom apartments and a three bedroom mews style house over three floors. The project GDV was £5.4 million.
The developers were an experienced team with a good track record in both new builds and refurbishments in London. Project design, dealing with contamination issues, working with architects, compliance and managing complex build programmes were all skills they were very experienced in. As well as managing the build programme, they were also acting as contractor which kept costs lower than if using a third party.
Where a property developer does not have equity to put into an opportunity, there are a few ways to structure 100% joint venture funding
Criteria for 100% Joint Venture Funding
Where a property developer does not have equity to put into an opportunity, there are a few ways to structure 100% joint venture funding. Whilst in this instance the total costs were over £3 million, the return on GDV was very strong. The return on GDV is key to attracting 100% joint venture funding and most such lenders will seek around a 27-30% return (before finance costs).
With this project being only eight units and will a project term of under 18 months, the total term is also attractive to a lender although up to 36 months is possible for larger developments.
100% Joint Venture Funding Advantages
The obvious key advantage in JV funding is that a developer need not have any, or much, equity to put into their opportunity. Depending upon the lender, they may not even have to provide a PG. Whilst profit will be split between developer and lender, this funding solution can mean that a developer can take advantage of an opportunity that may otherwise have slipped away.
Developers still must pay for costs up to acquisition, for example achieving planning consent, valuation, etc, but these can be usually recovered from the loan facility.
This project is a great example of how a development team and JV lender have partnered to enable the construction of a residential development that is sure to attract a strong interest from buyers.
If you have a project for which you require joint venture or equity funding, then contact Developer Money Market to see what options may be available. You can search instantly here using our loan comparison platform and take advantage of our full application support.
Need equity investment? Learn more about our equity investment service here.