Property Joint Ventures – Axiom’s solution and approach
Weve’ developed a legal “product” (involving a joint venture and a structured interface between the Corporate, Real Estate and Finance practice groups of Axiom DWFM) available to clients/targets in the real estate sector entering into, investing in and/or financing a real estate joint venture (JV) which takes the form of a special purpose corporate vehicle, an existing corporate joint venture or another business medium such as an LLP or contractual JV.
What are the key documents?
- Joint Venture Agreement (JVA)containing the shareholders agreement, and Articles of Association, an LLP deed or a contractual “partnering” agreement
- Share transfer/Share subscription embedded into the corporate JVA
- Sale/purchase of or options to sell/buy property
- Development agreement to build, develop or further develop the property or the site
- Senior debt
- Junior debt-this might include deferred consideration plus any interest
- Intercreditor deed/subordination arrangements
What are the key areas and pinch-points?
- Structure of the vehicle owning or acquiring the land
- Degree of control -50/50 deadlock or majority and minority interests
- Participating and protective rights enjoyed by each partner in the structure
- Board representatives of the JV Company or on the JV LLP and their other interests – including for example, those of directors of any of the JV’s shareholders or any company providing goods or services to the JV
- The parties’ 3 Rs in the JV project-Rights, Responsibilities and Risks
- Financing arrangements- ring-fenced purposes and security and re-payment arrangements
- Deferred consideration and retentions- Who holds and when paid? – (N.B. AXIOM DWFM can’t act as an escrow agent)
When and how do the participants and any third-party debt provider get their return?
Issues commonly include :-
- payment of any deferred and withheld consideration and repayment of debt.
- trigger dates-sale of one unit/entire site
- working capital requirements at the relevant trigger date
- calculating the pool from which the various payments are made (e.g., gross sale proceeds/income less expenditure (development costs, planning costs, professional fees, financing costs etc.))
- priority distribution “ladder” 1) Senior Debt;2) Junior Debt or shareholder loan (all or in tranches) 3) Further funding via additional equity injection; and 4) Shareholder distribution/returns.
Why use Axiom DWFM?
We are a specialist team of corporate, real estate and finance lawyers. This means :-
- We understand and have deep experience in the issues , can identify any legal concerns early and will hit the ground running hard for the client to ensure the deal timetable can be met.
- We have an acknowledged successful track record of handling a significant range of Real Estate transactions, identifying and implementing finance and refinancing options and setting up and/or advising on JV and other corporate vehicles both onshore and offshore.
- We agree fee budgets with agreed scoping of work and reasonable assumptions ensuring costs are pre-agreed, transparent and robustly formed with client input.
- Our legal toolkit for JVs – we have a number of tools designed to make JVs more efficient and easier to manage including scoping checklists and client questionnaires to help us perform targeted due diligence so that issues can be identified early and brought to a client’s attention and suggested solutions offered in order to ensure the deal can proceed on the client’s terms.
- Dedicated lead partner committed to work with the client to ensure delivery of a high standard of advice and service including reporting in a clear and concise manner to avoid misunderstandings and delays.
- We are motivated to get to know the client’s business to ensure effective delivery of legal advice and efficient delivery in costs terms.
- We will negotiate the legal paperwork reflecting the client’s must haves and non-negotiables in a proportionate and sensible manner to ensure the client achieves the goal of completing the project in accordance with the desired timetable
For further information about this product please contact any of the following:
Corporate-David Glover. E: [email protected] Mob: +44 7538 764556
-Claudine Lawrence E: [email protected] Tel: d: 020 3827 6117
Real Estate- Idnan Liaquat E: e: [email protected] Tel: d: 020 8951 6987