The UK property market is notoriously difficult to navigate, with high costs, complex regulations, and a shortage of affordable housing. For those looking to enter the market, there are two main options: to start a property development project from scratch or to joint venture (JV) with an existing developer. While both options have their advantages, there are several compelling reasons why JVing with an existing developer is the better choice for UK property development.
Entering the UK property market can be a challenging task for anyone. However, JVing with an existing developer can provide access to valuable expertise. An experienced developer will have a wealth of knowledge regarding the local market, contacts with suppliers and contractors, and a deep understanding of the complex regulatory landscape. Trying to build this expertise from scratch is time-consuming and costly, and mistakes can be costly. A JV partner can provide a valuable shortcut to success.
Another benefit of JVing with an existing developer is the sharing of risk. Property development is a high-risk business, with a significant amount of capital and time invested in each project. By JVing with an existing developer, you can share this risk, minimizing your exposure to financial losses. Sharing risk with a partner also provides an opportunity to leverage each other’s strengths, expertise, and resources to ensure project success.
JVing with an existing developer can also help to reduce costs. An experienced developer will have established relationships with contractors and suppliers, as well as access to financing at favorable rates. They may also have economies of scale that can reduce the costs of materials and labor, which can be particularly beneficial when working on larger projects.
Developing a property from scratch can be a complex process involving numerous stakeholders, including architects, contractors, lenders, and regulatory bodies. With a JV partner, many of these processes will have already been streamlined and optimized, reducing the time and effort required to get a project off the ground.
Lastly, JVing with an existing developer can also provide improved exit options. By partnering with an established developer, you may be able to sell your share of the property development project more quickly and easily, freeing up capital to invest in other projects or diversify your portfolio.
In conclusion, JVing with an existing developer is the better option for UK property development. It provides access to expertise, reduces costs, streamlines processes, shares risk, and offers improved exit options. By working with a JV partner, you can leverage their knowledge, experience, and resources to achieve success in the competitive UK property market.
With the days shortening and the kids about to go back to school, we are preparing for the autumn rush as our investors go back to their desks. I hope you had a good summer and survived the travel chaos across most of Europe if you were traveling.
Here is a quick look at what to expect this autumn. We are taking expressions of interest now, so if any of the below are of interest please let us know and we will add you to the list.
1. Lydd, Romney Marsh, TN29 9BA – 5 Residential Units
This is a great opportunity to effectively be the bank. A first charge lending opportunity where by you will fund the purchase of the site and the developer will fund the construction of the 5 timber frame properties. You will hold a first charge over the site as security. We have done a number of developments with this builder in Kent and they come highly recommended. Full valuation report should be available in the next 2 weeks.
Equity Requirement of £600,000 to buy the land. The developer will be funding £800,0000 of build costs with his own funds. Term – 12 months. Rate – 12% p.a Security – First charge GDV – £1.8m
Equity requirement of £265,000 to facilitate the purchase and development of land in
Swaffield Road into 9 dwellings, consisting of 3 town houses and 6 apartments with landscaped communal amenity space. This is combined with a senior debt package of £4m. The proposed development makes in excess of 35% POC (gross of finance), which will enviably net back to around 28%, which in the current climate given how competitive the land market is, is a very strong return.
Equity Requirement of £265,000 Term – 12 months. Rate – 14% Security – Second charge
3. Conversion of Richmond Park Hotel into serviced apartments.
The Richmond Park Hotel is ideally located close to the River Thames in this most sought after area of West London. One or a small consortium of investors are invited to fund the equity a high value asset with a GDV of £5.6Million.
Reduce the number of rooms from 20 to 15 Full scale refurbishment and modernisation into higher yielding serviced apartments 15 year lease to serviced apartment provider already agreed at £235,000 p.a. Ground floor consent to change to café – min £30,000 income p.a. Rooftop mobile mast generates £14,000 income p.a. Total annual income £279,000 Development capitalised at 5% giving a £5.6Million GDV Exit via refinance to add to developers Portfolio (already interest from HNW investors to purchase as an alternative with an 8% yield).
Equity Requirement of £850K Developer will be funding £130K of this with their own funds. Term – 12 months. Rate – 14% Security – Second charge.
We will once again be partnering with GCR our preferred development partners in Cambridge. Since the last two projects we did with them, they have become one of, if not the largest developer in Cambridge.
We will be offering our clients another JV planning uplift opportunity in this remarkable, fast growing, tech city. We have been promised its launch any day now so get in touch if you would like to know more.
5. Aerospace industry, plane leasing opportunity
GLOBAL JET & WETLEASING EU (G/W) have successfully done more than € 60.000.000 of ACMI (Aircraft, Crew, Maintenance and Insurance) contracts in the last 10 years. Due to increasing demand in the travel sector post Covid-19 they are now looking to lease and operate their own aircraft in 2023.
They are currently seeing a 68% increase in bookings compared to the same period last year which is a 24% above the pre-covid booking levels. This has led to a lack of available aircrafts on the market. Several contracts and opportunities were lost over the last months even if the rates are +45% higher than 2019 levels.
Going forward they would like to be in a much better and secure position to satisfy the needs of their clients. Instead of using different ad-hoc operators to complete their flight requests, G/W is looking to lease their own aircraft and complete some of these highly profitable requests themselves. G/W intends to lease one aircraft in 2023, and if the demand and sales are as expected then they intend to lease another aircraft in 2024. To accomplish this G/W requires a total investment of $1.000.000 by Q1 2023. G/W will be putting in $250.000 of their own money. The money will be used to establish an AOC (airline operating certificate) as well as pay the 3 months security deposit on the aircraft. Furthermore, it will allow G/W to cover all start-up cost.
This is a highly profitable industry since the EU introduced its canceled flight compensation scheme. Airlines are now far more motivated to reschedule flights rather than have to pay out up to 600 Euros for missed flights. With an expected return of 20-30% per annum, this should appeal to sophisticated investors with experience in the airline industry.
We are working with two of the leading developers in the Hydrogen sector to build hydrogen production facilities across Europe. With as capex of £30,000,000 plus this wont be for everybody. However if any of our larger institutional investors would like to know more more please get in touch.
So thats a quick look at some of the exciting opportunities coming up over the next few month, if you are interested in any of these projects please click on the links or get in touch via email or call on the contacts below.
Also if you have any interesting projects you think might be suitable for Willow Rivers, please get in touch as we may be able to help fund them.
Enjoy the last days of the summer and I hope to hear from you soon.
Subscribe to receive updates!
Click below to listen to the Willow Rivers Podcasts