Joint venture
A joint venture (JV) is a partnership where two or more parties come together on a defined project or investment, sharing capital, risk and return, while each keeps its independence outside the partnership. In property, a joint venture is one of the most common ways to carry out large acquisitions and development projects, where one party typically contributes capital and the other contributes expertise, land or project delivery.
A classic example is a well-capitalised investor (a financial partner) joining forces with a property developer (an operational partner). The investor provides most of the equity; the developer contributes the site, planning expertise and delivery of the construction project. The structure is nearly always set up through a jointly owned property company, often a single purpose vehicle (SPV) that owns the one property, so that the partnership is legally limited to exactly this project. The ownership shares and the distribution of profit are governed by a shareholders' agreement.
The key point in a JV agreement is not just the ownership split, but how the return is shared and who decides. Many agreements have a waterfall: the financial partner first gets its invested capital back with an agreed minimum return, and above a certain level the operational partner receives an increased share (promote or carried interest) as a reward for creating excess return. The agreement also governs decision-making authority (which resolutions require agreement), what happens in the event of disagreement or default, and exit: how and when the parties can sell, often with a right of first refusal, tag-along rights or a shotgun clause.
For investors and developers, a joint venture is attractive because it spreads risk and combines capital with expertise, but it requires a carefully drafted agreement because the parties have different interests in terms of time and risk. Due diligence on a property held in a JV must therefore cover the partnership agreement itself: capital commitments, exit mechanisms and what triggers a forced sale. A joint venture differs from a pure property syndicate, where many passive investors put capital into an arranged project without contributing operationally, and from sale and leaseback, which is a financing method and not a shared ownership arrangement.
From Placepoint's dictionary: Joint venture
More information: Store norske leksikon: joint venture
English: Joint venture (JV).
Common questions
What is a joint venture in property?
A joint venture is a partnership where two or more parties come together on a defined property project and share capital, risk and return. Typically, one party contributes capital and the other contributes land, expertise or project delivery, often through a jointly owned property company.
What is the difference between a joint venture and a property syndicate?
In a joint venture, the parties contribute actively, often in different roles (capital against expertise). In a property syndicate, many passive investors put capital into an arranged project without taking part operationally.
What is a waterfall in a JV agreement?
A waterfall describes the order in which the return is distributed. The financial partner first gets its invested capital back with a minimum return, and above a certain level the operational partner receives an increased share (promote) as a reward for excess return.
What should due diligence on a JV-owned property cover?
In addition to the property itself, due diligence must review the partnership agreement: ownership split, capital commitments, decision-making authority, exit mechanisms and what triggers a forced sale between the parties.