Do developers work with other developers?

[Arturo Borges]

Do developers work with other developers in a project? If so what is an example? One developer brings in the financing for the project, the other one brings some private capital from investors, the other one brings a good land deal, and so on?

[Scott Choppin]

Hi @Arturo Borges

This happens all the time, we call it a "joint venture". Just exactly as you say, diff developers bring diff value, capacity, and offers to the mix. 

Example:

We did a joint venture in Colorado, where we put a 16 ac site into escrow, for a long term escrow to give time for the land to be entitled for a 400-unit+ apartment project. The first JV was as follows: we had the land under contract and a relationship with the city, the other developer brought additional capital along with our money to cover the predevelopment and entitlement costs. Then the 2nd phase of the JV had us and the first developer do a further joint venture with Lennar Multifamliy Communities, where we brought the now fully entitled project to Lennar, and they brought the biggest part of the capital (it was close to $100M of total capital) to the table, and where they also provided the construction loan guarantees.

So the way to think of it, is take all the necessary ingredients to a project, then divide them up among all parties as needed (just watch that you don't divide the pie too much). 

- Land

- Capital

- Experience/track record

- Loan guaranteed capacity/financial capacity

- City/political relationships

- Build capacity/expericence

- Offer, i.e. the design of unique mix of any of the above that makes a project competitive

Hope that is of help.

~ Scott