Remington’s Joint Venture Program
Since our inception in 1993, Remington has been very active in the Joint Venture marketplace. Going forward, we see this as a hot sector. Please read through below to learn more about Joint Venture financing.
A joint venture is a contractual agreement joining together two or more parties for the purpose of executing a particular business undertaking. All parties agree to share in the profits and losses of the enterprise.
In commercial real estate, certain investors have a strong appetite for joint ventures with experienced owner-operators or developers, particularly those with a track record of success in a particular market. Investors tend to seek partners who can create value in ways they can’t on their own. Creation of value can come in many ways, such as the identification of off-market transactions that are purchased at attractive prices, the rehabilitation of an asset, more effective management of a property, or ground up development of an asset.
Yield expectations among institutional equity investors vary based on several factors, including transaction risk, desired hold period, the amount of leverage, and the amount of co-investment by the sponsor. Generally, investors seek five-year internal rates of return between 15% and 18% on an un-leveraged basis. On a leveraged basis, returns generally range between 18% and 22%. In many instances, institutional equity partners seek to limit overall property leverage to between 50% and 60%, thus lowering the internal rate of return to the sponsor.
Joint venture equity transactions generally are structured so that the institutional investor contributes between 80% and 90% of the required equity, with the sponsor investing the remainder. Joint ventures usually include buy/sell agreements that allow a sponsor to buy out the partner within a specified time period. Investor’s generally have approval rights over major decisions including financings, sales and annual budgets.
For additional information, please visit our JV website at www.remingtonfinancialgroupjointventure.com
Aaron Bogdanoff
480 659 5187
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