Joint Ventures

A Joint Venture, JV, is a registered entity between 2 parties, the land owner and the developer.
The developer may not necessarily be the contractor, but he is the financier of the project. The two
parties must come to an agreement to the extent of the contribution of the equity of the project.
A company should be formed in the name of the JV and the profit distribution should be in the ratio
of the equity contribution of both parties. The company would be dissolved at the end of the project
life cycle and the profit shared in the ratio of equity contribution.
Equity is the contribution of both parties in the JV.
The ratio should be based on the value of the land and the project development cost.
JVs should not be automatically shared 50-50, it should be based on the value of the contribution
of both parties. For instance, two different JVs with similar briefs (no of units to be built) in Yaba
and Ikeja cannot be shared in the same ratio simply because the value of properties in both locations
differs.
The land owners tend to overprice the land in order to increase their share in the JV. Hence the
need for an independent valuer to look into the land. The same should be done for the BOQ of the
developer.

There are certain areas where the ratio is fixed (e.g. Ikeja GRA). In such cases, there is a general
value of the land and the construction cost rarely changes.
Premium is an upfront payment that land owners sometimes request for. The origin of this is to
resettle the land owners to a different location while the project is going on.
In an ideal case, the premium ought to be taken out of the project before the profit is shared.
There’s no higher party in JV, both parties are important because they are both contributors and
offers values albeit differently.
Should in case the value of the land increase while the development is going on, the appreciation
of the land comes in at the point of sales.
If the value of the land does not make sense, do not proceed with the JV.
Beware of overpriced lands.
More often than not, land owners do not lose even if the cost of the project skyrockets.
The size and shape of the land is key. The shape would determine the buildable area of the land.
The value of the land based on size may differ from its value when the buildable area is factored
in.
Go into negotiations having known your initial cost.
Initial sketch gives you an idea of the cost per square metre. After the initial design, get the current
cost per sqm which is currently about 200k.
You can start selling your property before it is built.
What you can’t sell off-plan, there’s no guarantee you would sell it after completion.
Understanding the process and strategy is more important than fund.
You must carry spiritual capacity as you proceed in your real estate journey.
The supernatural must come in contact with knowledge for things to happen.
God would open doors when He sees your efforts and movements.
You can’t go beyond your mind.
Take what you are taught in church literally. Be stupid enough to believe God.
The book of Isaiah is a gem for developers.
God’s word is a map that would show you where to go and what to do. Get the word for your
project and meditate on it.
The only way to get things done is to move.
It is possible to do big projects without bank loans.
Build your own systems of marketing.

Checklist for closing a JV

✓ Study the brief for the location, size and shape of the land. Request for the survey plan.
✓ Go inspect the land.
✓ Get in your professionals
✓ Get JV agreement (protect your interest as much as possible)
✓ Start marketing your project.