Articles
Basic Features of Real Estate Joint Ventures
by Paul Wright Tax Accountant Toronto - A Simple Checklist for ChIn real estate
industry real estate joint venture refers to restructuring of private
equity funds and creating joint ventures. The current trend shows that the
process is fast turning into mainstream in the industry. Basically they provide
a way of matching the capital that is required for either acquiring or
developing real estate projects. The joint venture involves at least two
stakeholders. One of them assumes the role of performer and takes care of the
practical implementation of te project whereas the other one takes care of the
financial requirements for effective implementation of the project.
Methodology
of Real Estate Joint Venture
The methodology
for the process involves the partnership of two stakeholders. One of them is
the operating member and the other one is one of the joint venture
real estate investors referred
as the capital member in the joint venture. It is the former that operates or
manages the real estate assets whereas the later is primarily financing partner
in the real estate project.
Why
Capital Member Enters into Real Estate Joint Venture
Capital members
assume the role of investors in the joint venture with an operating member
because they need the services of an expert in real estate assets and also for
management of the assets on regular basis. Operating members usually have the
ability to acquire, manage, and develop assets for projects build to suit
commercial real estate that can provide rewarding returns on the
investments thereby swelling up the profits share of both partners. They
however often lack the capabilities of providing adequate amount of material
capitals for the joint venture. This deficit is compensated by the capital
member in the venture.
Common
Types of Real Estate Joint Ventures
Most common type
of real estate joint ventures is those in which the operating member forms a
limited liability company along with the capital member. On formation of the
limited company the partners enter into the operating agreement that is also
known as joint venture agreement in the real estate industry. With this
agreement the following aspects are taken care of by the real estate development companies
and their investing partners. The agreement
deals with rights of the respective parties in respect of profit sharing,
decision making, exit and transfer rights of membership, and all other
applicable conducts, rights, as well as remedies.
Joint
Venture Agreement Components
Some of the major
components of the joint venture agreements concluded in real estate industry
are capital contributions and the rights and regulations to be followed by the
two partners in the project. Main objective of the capital contribution
determination is to ensure specifically the capital contribution to be made by
the real estate investment companies so that there is no confusion
in this regard. The agreement should specifically tell what the
mandatory initial contribution should be and how the operating member can use
them.
Usually the
capital member provides 90-95% of the capital and the operating member
contributes 5-10% of the capital requirements in the real estate joint venture
project.
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About Paul Wright 
Tax Accountant Toronto - A Simple Checklist for Ch
65 connections, 2 recommendations, 329 honor points.Joined APSense since, February 8th, 2014, From North York, United States.
Created on Oct 4th 2017 06:16. Viewed 470 times.
