Joint Ventures

Joint Ventures

Joint Ventures

A service- or sales contract does not always meet the requirements. Often a higher degree of strategic cooperation brings added value for both parties.

We are interested in joint ventures for the following reasons:

Aligned interests – While the financial incentive of a service provider lies in the calculation of the highest possible fee for the least possible effort, the only goal of the joint venture partner is to lead the project to a successful outcome. This aspect is of particular relevance for companies wishing to implement a project outside their core competencies.

Saving of transaction costs – Projects go through different phases, which require specialized developers. Through joint ventures it is possible to carry out downstream value creation phases without ownership transfers and associated transaction costs.

Risk distribution – Not all stakeholders have the same risk tolerance. This often divides the market into the extremes “service provider with exemption from liability” and “personally vouching project developer”. With the right partner, it is possible to allocate the project risk on a selective basis. This turns service providers into co-entrepreneurs and allows project initiators to limit their overall risk position.

Synergies – The greatest added value arises where competencies complement each other and networks are stacked.

How do we execute joint ventures?

1

Setting objectives

More than any other business, the success of a joint venture is based on a deep understanding of the motivations of the counterparty. In the first step, we therefore jointly determine the goals of a potential partner.

2

Evaluation of Status Quo

Joint ventures live on the contribution of different assets by different parties. In the second step, we determine what our potential partners can contribute and if we can close the gaps in the project with our own building blocks.

3

Evaluation

As soon as there is a consensus on the assignment of tasks, we quantify the value of the services and assets to be contributed by each party, taking into account the risk allocation, and derive a fair distribution of profits from this.

4

Joint venture agreement

In the last step, the framework conditions are contractually fixed and the implementation of the project can begin.

Applications

Development of building land for a consortium of heirs
Initial situationA consortium of heirs owns a land plot. The community has no experience in land development, but would like to benefit from the rise in value through a development plan.
ChallengeThe members cannot assess the risks and are not willing to invest money in the process.
SolutionWe initiate the development plan process at our own expense. In the event of success, we receive a fee agreed in advance to cover our expenses plus a risk surcharge. Should the procedure fail, the group of heirs will not incur any costs. It therefore bears no risk.
Win-Win✓ The community of heirs gets the chance of an increase in value without the risk of a capital loss.
✓ Our experience in risk management provides us with an additional income through the risk premium.
Optimization of a multi-family house
Initial situationA private owner holds a multi-family house in Berlin with potential for further development and an attic conversion.
ChallengeThe owner has no expertise in project development and no liquid funds to implement the necessary measures. However, he also does not wish to sell to a project developer.
SolutionWe devise a development and financing concept and implement it in cooperation with the owner. We are remunerated in proportion to the generated value added.
Win-Win✓ The owner gains through the increased value of his property.
✓ We get the opportunity to develop a project that was not for sale.
✓ New living space is being created in the city
New building for an own development
Initial situationWe develop our own property until it is construction-ready.
ChallengeNew construction lies outside our core competence. At the same time, we do not want to resell the idle land.
SolutionA contractor performs the construction work as part of a joint venture at cost without margin. In return, he receives shares in the SPV and participates in the project profit.
The construction company receives a higher total remuneration than in the case of a pure service contract.
Win-Win✓ The reduced overall investment costs facilitate the financing of the project
✓ Through a specialized partner, we are able to advance the project beyond the building rights procurement phase.