Joint Venture Split

[Justin Cooke]

I am new joint ventures and trying to get an idea of a fair split for a large apartment complex development deal that we are looking at. Basically, there are two parties: the local partners, and the out of area partners.

The local partners found the deal, arranged meetings with developer and other parties, will act as boots on the ground asset management for attaining local bank financing, all work with architect, oversee management of construction project, and asset management for eventual lease up/ongoing property management. Have a wealth of knowledge of local practices and a large network of local relationships necessary to do business. They are providing roughly 12% of the necessary cash, and providing apartment plans/blueprints.

The out of town partners are putting up 88% of the cash, experience (currently own and operate with in-house PM over a thousand multifamily units), ongoing involvement in consultant role working with local partners.

Would it reasonable for local partners to ask for a finder's fee and/or asset management fee as additional % equity in the deal?  If so, what would be a reasonable ask for this situation?

[Aaron Montague]

@Justin Cooke

I guess the answer would be: 

"As much as you can get, no matter what side you are on."

You are going all the work and putting up 12% of the cash, correct?  I would say 34% to the local team.  

25% for all the work. Leaving 75%.

Buy 12% of the remaining 75% = 9%.

Add.  34%.  Might want to round up to 35% for easier math later :)

The goal for any JV as I see them is to make sure everyone makes money. If your local team wants to make $150k/year, and the out of town team wants 12%, find out if there is overlap to allow that to happen. If there is, all the better. If not, the place may be too expensive for the deal to work.

I don't know what type of long term strategy you are looking at, but make sure you get paid.