Equity / Joint Venture Funding
It is an alternative to Mezzanine Funding in which the equity partner shares in the risks and profits. Generally, prime funding is up to 70% of NRV (Net Realized Value). Most of this is provided by a main lender, while the remainder is provided by an equity partner.
It protects you / the developer from all hard and soft costs up to 100% of the loan amount, and the interest is capitalized for the duration. In order to obtain equity investment, the developer and construction company must prove their experience in developing and building similar projects. In the valuation of development, the GRV should be used (Gross Realised Value).
In instances where the project owner is able to benefit from an additional party’s expertise, financial position, or other resources, private equity / joint ventures are particularly useful.
When Equity Funding should be used:
- A landowner seeking a property developer to partner with.
- An experienced property developer seeks to partner with a landowner.
- Rezoning or approvals at the beginning of the project timeline.
- Demonstration of successful project completion ability for larger projects including experience in development management.