Joint Venture Finance
Joint Venture Finance – Summary Joint Venture (JV) finance is a collaborative funding structure between a developer and an investor or finance partner. Instead of providing a traditional loan, the JV partner contributes capital—often covering 90–100% of the total development cost—in exchange for a share of the project’s profits. This type of finance is typically used when a developer has a strong track record and a viable project but lacks sufficient equity to secure senior or mezzanine debt. Key Features of JV Finance: The finance partner shares project risk and return Profit shares are negotiated (often 50/50 or 60/40 in favour of the developer) The developer may still receive a management or development fee Ideal for landowners or developers with planning or build expertise but limited capital
Joint Venture Finance Example
Example 1: Residential Development JV
Project Overview
GDV: £4,000,000
Total Project Cost: £2,800,000
Land Value: £900,000 (owned unencumbered by the developer)
Construction & Professional Fees: £1,900,000
Structure:
The developer contributes land (valued at £900,000) as their equity.
A JV investor funds the full £1,900,000 construction and professional cost.
Profit Share: 50/50 after costs are repaid.
Developer receives a management fee of £100,000 during the project.
Outcome:
On sale, the profit after all costs is £1,200,000.
Each party receives £600,000 profit, plus the developer retains their land value and fee.
Example 2: Land Purchase and Development JV
Project Overview
GDV: £10,000,000
Total Cost (Land + Build + Fees): £7,000,000
Developer Equity Available: £0
Structure:
A JV partner funds 100% of the project cost:
£2,500,000 for land purchase
£4,500,000 for build and associated costs
Developer contributes planning expertise and project management
Profit Share: 60% to JV investor, 40% to developer
No debt is taken; all capital is equity from the JV partner.
Outcome:
Net profit on completion is £3,000,000
JV Partner receives £1,800,000
Developer receives £1,200,000 (plus possible fees if agreed)
Joint Venture Finance Example
Example 2: Land Purchase and New Build Development JV (with 1.5% Monthly Coupon and Developer Share of 60%)
Project Overview
Gross Development Value (GDV): £10,000,000
Total Project Cost: £7,000,000
Land Purchase: £2,500,000
Construction & Professional Fees: £4,000,000
Finance & Contingency: £500,000
Developer Equity: £0 (contributing time, expertise, and project delivery)
Project Duration: 18 months (14-month build period)
Joint Venture Structure (with 1.5% Monthly Coupon and Developer Share of 60%)
The JV Partner provides 100% of the £7,000,000 capital, and the coupon is calculated only on drawn capital over 14 months.
Coupon (Preferred Return): The JV Partner receives 1.5% monthly coupon on the drawn capital during the 14-month build period.
Profit Share Agreement:
JV Partner: 40%
Developer: 60%
The Developer also earns a project management fee of £100,000 during the build phase.
Coupon Calculation for Drawn Capital
Assumptions:
50% of capital is drawn at the start, which is £3,500,000.
The remaining 50% of capital (£3,500,000) is drawn evenly over the 14-month period (monthly drawdowns of £250,000).
1. Initial Drawn Capital (50% of £7,000,000 = £3,500,000):
The coupon on the initial £3,500,000 is calculated for the full 14 months.
Coupon for initial drawn capital:
£3,500,000 × 1.5% × 14 months = £735,000
2. Remaining Drawn Capital (50% of £7,000,000 = £3,500,000):
The remaining capital is drawn evenly across 14 months at £250,000 per month. The monthly coupon for each drawdown is:
Monthly coupon for £250,000:
£250,000 × 1.5% = £3,750 per month
Total coupon for remaining drawn capital over 14 months:
£3,750 × 14 = £52,500
Total Coupon (on Drawn Capital):
£735,000 (initial drawn) + £52,500 (remaining draw) = £787,500
Financial Outcome
On Completion:
Total Net Profit: £3,000,000
Coupon Calculation:
Total Coupon = £787,500
Remaining Profit After Coupon:
£3,000,000 (Total Profit) - £787,500 (Coupon) = £2,212,500
JV Partner Share (40%): £884,000
Developer Share (60%): £1,328,500
Total Returns:
JV Partner Return:
£787,500 (coupon) + £884,000 (profit share) = £1,671,500
Developer Return:
£1,328,500 (profit share) + £100,000 (management fee) = £1,428,500
Financing Success Across the UK
Project Feasibility Evaluation
We conducted a comprehensive feasibility analysis for a high-profile mixed-use property development in Central London, evaluating both funding viability and projected returns on investment. Our team delivered detailed financial modelling and in-depth risk assessment, enabling the client to make informed decisions with confidence. This strategic groundwork ensured a financially sustainable and profitable development path from the outset.
Land Acquisition Support
We successfully arranged land acquisition finance for a client purchasing a prime residential development site on the outskirts of Manchester. Our services included sourcing competitive funding solutions, negotiating favourable purchase terms with the landowner, and managing the legal and due diligence process to ensure a smooth, timely transaction. This strategic approach allowed the client to secure the site efficiently and proceed with property development plans on schedule.
Commercial Loan
We successfully arranged commercial redevelopment finance for the transformation of an office space in Birmingham. By negotiating with multiple financial institutions, we secured highly competitive loan terms tailored to the project’s scope and timeline. This enabled our client to significantly enhance the property's value and functionality while remaining within budget—maximising both investment potential and long-term returns.
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