Do I look for a JV partner or buyout- commercial development

Hi property investors, I have an current approved DA and BA for 10 tilt panel smallish industrial units (GFA 1498m2 on 2796m2 total site) in a prime industrial precinct located on the Sunshine Coast, the middle of the multi-billion dollar development region and health - technology - learning - entrepreneur-greenfields investment hub. (view council video for clarification: ) the 10 units are currently being marketed by local agents and I have a couple of pre-sales. I have a builder lined up with fixed price turn key contract and the site is ready to start building but as I have my lending with CBA and they have tightend up on finance for all investment construction and now require >60% presales, I am weighing my options because the project will go stale if I dont start the build soon. Most other lenders will no doubt require same pre-sales, or want a higher margin (i'm currently at a good % for development funding) Site is 1m, construction, ons+ holding is 1.3m, Build time is allowed at 6mths (very achievable). Discounted realisable sales value of 3.0m. If I can get a JV in place so to start construction immediately, the realisable profit will be higher as finished units are worth more than the pre-construction value. I think I need a JV partner with access to ~ $1.3m. I am considering my options? Do I just sell the site to a bigger fish or take on a JV partner?

 

You could possibly take on multiple, eg 13 people with $100k each. We put together structures for those sort of ventures all the time. BUT you need to find the people, often an accountant with a lot of SMSF clients is where my clients find them from.

Things seem to be more harmonious with a large group, where you have distinct control, then a small group.

 

Ultimately a JV partner is going to ask why you can't achieve the required level of pre-sales for traditional funding so you need to have a good answer to this. The whole 'just because they're off the plan, buyers will come once they're built' should be supported by solid evidence if this is the case.

I suspect it will be much easier for you to deal with one JV partner rather than sourcing and negotiating with 13 people. You should also consider managed investment scheme compliance if you do try and get a number of people to passively invest.

Appointing a JV partner is going to dilute your profits. Is there scope to ramp up the marketing and potentially lower some sale prices to reach the pre-sales targets? This may be more profitable than bringing in a JV partner.