The Art of Structuring Joint Ventures in Development Projects
ASK:
I’m partnering on a new development. How do we structure a JV that’s fair, and future-proof?
ANSWER:
Joint ventures can be great or horrible just like any partnership.
At their best, JVs bring together complementary strengths: land, capital, expertise, and relationships. At their worst, they turn into tug-of-wars over control, profit, and vision.
At I&D Consulting, we’ve seen both, and we know how to build structure that supports collaboration instead of friction, and provides clear language outlining all expectations.
Core Elements of a Solid JV
- Define Contributions Clearly
Who brings land, capital, guarantees, or expertise? Define it in writing from day one. - Set Decision Rights Early
Clarify what decisions require mutual consent versus day-to-day control. Ambiguity breeds resentment. - Align Incentives Through Distribution Waterfalls
Incentivize performance. Structured promote tiers and preferred returns reward results. - Plan for the End at the Beginning
How can partners exit, sell, or buy out each other? Build those terms before problems arise.
Why Structure Matters
A well-structured JV deal allows each partner to know their lane, rewards structure, and decisions happen faster. Poorly structured JVs paralyze projects before they get started.
KEY TAKEAWAYS:
- Clearly define roles, expectations, and outcomes.
- Align incentives through structured distributions.
- Always include exit strategies from day one.
People Also Ask
1) What’s a typical developer promote in a JV?
Anywhere from 20–30% of profits after preferred returns, depending on risk and contribution.
2) Who should control major decisions in a JV?
It depends on contribution. The capital partner may require veto rights; the developer typically manages day-to-day.
3) When should a JV be formalized?
As soon as basic terms are agreed upon before money is spent or entitlements are filed.
