Joint Venture (hereinafter: ‘JV’) is a widespread model of cooperation in the real estate market, under which at least two entities aim to implement an identical project or construction investment.
A JV agreement constitutes a broadly defined economic cooperation between the entities involved under the terms and conditions set forth therein; formally and legally, a JV agreement is an unnamed contract. The JV Partnership model does not oblige the formation of companies or an enterprise for proper operation, for rights and obligations and profit are subject to participation in accordance with the provisions of the contract.
The reality of the real estate industry shows that permanent cooperation works better with the establishment and involvement of a corporate structure in the form of, for example, a parent company and special purpose vehicles.
Characteristics of the JV Partnership model:
(i) one party (partner) participates in the development venture through its know-how and performs the operational function,
(ii) the other party (partner) participates in the development venture through its capital and acts as a financial investor,
(iii) equitable distribution of profits and losses – a necessary condition for a precisely structured JV agreement that meets the needs of the parties,
(iv) minimisation of risk due to the participation of several entities with varying degrees of experience or capital,
(v) excellent opportunity to engage foreign capital in investing in the Polish real estate market.
Currently, the popularity of ‘experience and capital’ business cooperative is growing, both in the commercial area (warehouses or shopping centers) and in the residential sector. A common phenomenon in the real estate market recently is the cooperation of two developers to carry out a development project – the real estate market knows numerous examples of successful investments using JV construction.
*You are more than welcome to share your detailed knowledge and exchange experience on the topic.
22 December 2022.
