Although Faris Lee’s primary business remains advising investors and developers looking to sell or acquire assets, joint venture advisory has emerged as an in-demand and synergistic offering. Senior managing director, Nicholas Coo explains.
A successful real estate venture requires capital investment. Capital requires a promising real estate opportunity. In recent years, we have seen an emerging need to create a bridge between the “need” (real estate operator) and the want (capital investor / partner) through joint venture partnerships. What makes the arrangement of a joint venture different than a sale transaction is that you are pairing people who must work together past the closing date and execute a business plan together. This involves negotiating goals and objectives in addition to personalities, philosophical positions and a relationship that survives the closing. In an ideal situation, a good pairing can not only endure through a single closing, but into future partnerships as well.
Although Faris Lee’s primary business remains advising investors and developers looking to sell or acquire assets, joint venture advisory has emerged as a synergistic offering due to a developer client base desiring capital infusion, and a large client base of investors seeking to create financial partnerships.
Feedback from clients and industry colleagues on both the investment and ownership sides indicate a “missing marketplace.” That is, lack of an arena where owners/developers and investors can match up in mutually beneficial partnerships to realize their goals. With institutional capital typically limited to larger deals, those with projects or assets in the $1M – $25M range often lack access to, or knowledge of, willing and suitable equity partners. All the while, an active private investor base is out there, looking for yield but not knowing how to find it.
This void, coupled with the personal and fiscal complexity of structuring joint venture projects, has led Faris Lee into the area of advising joint venture transactions. To date, the company has brokered joint venture deals involving ground up development, value add investments, and core-plus acquisitions, primarily within the retail product type but also extending to multi-family and others.
Many of our joint venture deals started with a casual conversation where a developer client was seeking a partner with whom they could have a relationship to execute a business plan or an investor seeking an operating partner with whom they could confidently put their money to work. Whether an investor or developer / operator desires a simple structure or a more complex tiered structure with multiple financial metrics, engaging a qualified advisor can save time, increase efficiency, and help to avoid the potential pitfalls of an unguided joint venture.