Joint Venture

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The insurance giant Australian Unity has partnered with venture capital firm Taronga Ventures to promote growth within the real estate sector through an innovation program called RealTechX.
Australian Unity joins core real estate partners Dexus, LendLease, ISPT and PGIM who will collaborate with emerging real estate technology companies in a bid to help Australia’s $182 billion real estate sector prepare for the next phase of industry evolution. 
RealTechX is a program aimed at emerging technology businesses in the real estate and wider built environment sector to achieve “rapid and sustained growth.”
It seeks to connect a network of business, education and government leaders across the real estate sector.
Mark Pratt, Australian Unity’s executive general manager of property, said collaboration and strong relationships were key to Australian Unity’s track record of delivering for investors through real estate investments.  
“We are pleased to be involved with RealTechX, not only to ensure Australian Unity is on the forefront of upcoming real estate technology, but to help mentor the next generation in the industry and provide new and innovative solutions in the property sector. 
“At Australian Unity, we see private capital as critical to funding social infrastructure and other assets that deliver the services our communities need while providing investors with consistent returns.
“Over the last 20 years, Australian Unity's property team has created opportunities for both large institutions and retail investors to access the development of vital social infrastructure services as part of a diversified property investment portfolio,” Pratt said.  
Jonathan Hannam, managing partner of Taronga Ventures, said Australian Unity’s track record in social infrastructure investments sees it well placed to support RealTechX. 
“We are delighted to have Australian Unity as a partner in RealTechX. With its diverse portfolio and focus on alternative asset classes, we will have a broader ecosystem that will allow us to invest in a more diverse group of emerging businesses – across aged care to medical and hospitals.
RealTechX’s first cohort of 10 market-ready technology businesses will be announced in December.
 
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Australian Unity partners with Taronga Ventures on real tech growth program, RealTechX

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Joint venture, LEPC9, has lodged its first development application within its master plan-approved site, currently the Nine Network’s headquarters in Willoughby on Sydney’s lower north shore.
The DA includes provision for 40 apartments and associated parking as well as the creation of a public piazza at the corner of Scott Street and Artarmon Road. 
It is being designed by architects of CHROFI, and <a href="/expert-insights/investing/channel-nines-willoughby-hq-site-comes-to-market">the development is being offered to market</a>.
The site received concept approval earlier this year in January 2019 for 460 apartments across ten mid-rise buildings; public piazzas and an extensive publicly accessible open green space.
The DA submission by LEPC9 is the next stage of the approval process while negotiations progress with a number of parties from the expressions of interest process. 
It is projected that construction will commence in 2021.
In the erstwhile Channel Nine will continue to lease the site until a later point next year. 
Colliers International National Director, Development Sites, Residential, Guillaume Volz said despite contrary speculation in the media, demand for the site has intensified and negotiations are continuing with parties on the site well over $220 million. 
“It is a complex project/site and this has resulted in protracted negotiations as parties continue to develop their understanding of this significant trophy site,"
“Market drivers such as the further interest rate cut to 1 per cent by RBA as well as signs of the Sydney market recovering and gearing up for the next cycle, have contributed to the continued strong interest in the site,”Mr Volz concluded.
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Stage 2 DA lodged for Channel Nine's Willoughby headquarters

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Construction firm Built has teamed up with Japanese giant Obayashi Corporation for large-scale construction work in Australia, with the JV chosen as preferred contractor for the $200 million construction of the $350 million redevelopment of the Hotel Windsor in Melbourne CBD for the Halim Group.
Brett Mason, Built managing director, said the JV deal gives Built gives us further scale and capacity to compete for larger construction projects of A$200 million and above,
“In addition, we will be combining our local construction expertise and knowledge with Obayashi’s global experience, including accessing Obayashi’s Technical Research Institute in Tokyo - an R&amp;D facility dedicated to the development of construction-related technologies - in line with our vision to drive further innovation in the construction sector," he said.
“I am also pleased to announce that for its first project, our joint venture has been selected as preferred contractor for the circa A$200 million construction of the A$350 million redevelopment of the historic Hotel Windsor in Melbourne CBD for the Halim Group. 
"Built’s expertise in sensitive heritage projects and track record in luxury hotel construction were key to our success, with works on the 135 year old hotel to include a complex heritage refurbishment and construction of a new tower wing. Construction works are anticipated to commence onsite in the first quarter of 2017 to deliver a six star addition to Melbourne’s luxury hotel sector in 2019. 
Toru Shiraishi, representative director, president of Obayashi Corporation,  said Obayashi Corporation has been seeking to expand our business platforms in Oceania in addition to our existing market base in South East Asia and in North America. 
"Under this agreement, we will combine Built’s local construction expertise and network, and the knowledge of our global experience and financial strengths to create further opportunities to expand the business operations of both companies in Australia. We very much look forward to working with everyone at Built as we develop this exciting partnership.”
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Built signs JV with Obayashi Corporation, developing Melbourne's Hotel Windsor

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Barry Plant, head of the Victorian estate agency that bears his name and which is in talks with LJ Hooker about creating a joint venture company, said the Melbourne trust fund missing millions matter would not affect their ongoing talks. 
It was revealed last month in The Australian Financial Review that LJ Hooker and Victorian real estate agency Barry Plant were in the final stages of talks about creating a joint venture company.
The two businesses account for 6.7 per cent and 1.9 per cent respectively of the national volume of real estate sales.
LJ Hooker has 700 franchises in Australia and New Zealand.
Barry Plant has 80 franchised offices in Victoria – with an 11.5 per cent state market share by volume.
It also has two offices in Gold Coast and Adelaide.
Any joint venture that would keep the two brands distinct.
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Barry Plant says LJH talks will continue

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 <img src="/images/2015/12/2/Holdencapital_banner.jpg" alt="" width="551" height="116">
SPONSORED POST
Just what are the nine must-ask questions you nee to consider before you enter a joint venture?
1. “Needs V Wants?” – A successful Joint Venture or “JV” is typically formed on the basis that the JV parties are contributing complimentary skills and or value to the alliance. The question for the Developer to ask himself is are the skills/value that the other party brings to the deal i) needed; and ii) cannot be better satisfied by other means such as paying an external consultant. A JV partner generally comes at a price such as an agreed profit share based on the contributions each party makes to the “Project”, which results in the Developer giving away a large percentage of his profits. 
2. Trust – What do you know about the party/ies you are about to enter into a JV with? Have you done business with them previously or do you know other Developers who have and if so, what was the outcome? How did they perform against initial expectations? Past performances can provide you with a valuable indication of what to expect in terms of behaviour, work ethic, and integrity. Its just as important to undertake thorough due diligence on a potential JV partner as it is on the metrics of the project. 
3. Incorporated or Contractual JV? – There are pros and cons for both, so its important to understand the features of each and decide which best suits the participants and the project. Appropriate legal and taxation advice upfront is strongly recommended; i.e. the Corporations Law allows parties to look behind the corporate structure of an incorporated JV and attach liability to individuals. On the positive side, the transfer of an interest in an incorporated JV can be done via a simple transfer of shares, which is useful where a JV evolves and needs to take on a different shape from that first envisioned. A contractual JV may be a quicker and simpler structure to establish, but documenting it can still be quite cumbersome. There are potential tax benefits in a Contractual JV allowing tax losses to be affectively offset against income outside the JV, while an Incorporated JV quarantines them within the incorporated entity. Again, it is recommended that the parties seek independent legal and taxation advice having regard to their respective interests, prior to establishing the JV.   
4. Decision Making – It is important to understand and agree how key decisions will be made. In some JV’s decisions will be made by one party only (where the other parties are considered “silent partners”), whereas in most JV arrangements, decisions are made jointly. It is important to establish from the outset, who will be responsible for making key decisions that affect the project.
5. Who will do what? -  a simple way to determine each parties responsibilities is to list the tasks/responsibilities that need to be completed throughout the development process and assign a lead role and a peer review role. A suggested way to simplify this is detailed below: 
<a href="/images/2015/12/2/Screen%20Shot%202015-12-02%20at%202.17.58%20PM.png" target="_blank">Click to enlarge</a>
<img src="/images/2015/12/2/Screen%20Shot%202015-12-02%20at%202.17.58%20PM.png" alt="">
This is obviously a simplified list, but by allocating responsibility for the macro tasks, that party is then responsible for allocating the appropriate sub-tasks with peer reviews undertaken by the secondary party to ensure compliance as a double check.
6. Tracking Performance – From the outset it is important to establish clear performance targets for all JV parties and then ensure that these measures are tracked and reported. Regular meetings between the JV parties should be scheduled and performance against the agreed measures should be discussed to ensure the project remains satisfactorily on track. Identifying poor performance early and acting to resolve any issues is critical to the projects success.      
7.Profit sharing – It is critical that the distribution of profits and risks borne fairly represent the contributions made by each party based on their contributions - skills and financial. These contributions can change over the life of a JV and it is therefore important that there are agreed mechanisms to allow changes to the profit distributions to reflect those changes. Typically, this occurs where there is a requirement for subsequent equity contributions, particularly where only one party has the capacity or will to participate. The agreement should contemplate this and provide for appropriate adjustments to entitlements to reflect the change in contributions/risk. Poorly structured agreements inevitably result in a dispute situation and if a party is not adequately incentivised, this could impact their performance and in turn the project success. 
8.Disputes – All agreements should include appropriate dispute resolution clauses to ensure the project is not stalled where an impasse is reached on key issues. To avoid the cost in time and money, it is important to clearly articulate the dispute resolution procedures and most good JV Agreements will include a suite of tailored clauses. Typically, they will provide for a number of pre-agreed outcomes but also where a critical dispute cannot be resolved using those clauses; the agreement will should either have a deadlock or mediation process. Ultimately, if mediation fails it could result in expensive litigation, which is to be avoided at all cost. 
9.Ending a JV arrangement – Unlike a “partnership” a JV is not a legal entity and is typically an agreement between two or more parties to form a strategic alliance for the purpose of a single or specific number of projects. Therefore the dissolution of a JV is reasonably straightforward, doesn’t typically require any further legal documentation and will end on completion of the project/s. This is why JV’s are quite common in property development as they can be formed for the purpose of a single project, should contemplate various exit solutions to deal with situations where the project fails meet the original expectation and allow for the JV parties to move on at completion. 
This article was written by Dan Holden of HoldenCAPITAL, who are a bespoke construction finance firm, they arrange construction finance and invest in projects through their equity fund, Queen Street INVEST. To discuss your project finance requirement please call (07) 3171 4200 or visit HoldenCAPITAL <a href="https://www.holdencapital.com.au/" target="_blank">here</a>.
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