The Government has been clear in its messages recently that the housing market is one of the key pillars of the economy and that ways to ensure delivery of new homes is essential.
With the attempt to clarify the position on Help to buy to ensuring that the housing market opens for business – steps are being taken. It would be fair to say that these are a start and that a lot more is likely to be required, in particular in relation to the planning process.
This aside, we have seen that the market is also looking at how it can ensure that schemes are still brought forward – joint ventures. We are seeing that these are continuing to maintain their growth as a key means of delivery for organisations.
In the recent weeks those with existing joint ventures have faced some difficult, and previously unforeseen, circumstances with conversations surrounding whether construction sites may remain open in light of the previous Government lockdown advice and COVID-19.
The mechanics in a number of the market’s joint venture structures provide that any decisions such as pausing (or accelerating) construction, changing tenure mix or amending the sales strategy are matters for the joint venture partners to agree within the commercial environment and minimal pre-determined criteria. This has result in partners being able to agree flexible approaches that are truly suited to the particular project.
Whilst some may argue that the aims of a private developer and a registered provider are not always aligned within the joint venture structure. The reality of the current market has emphasised the importance of those partnering arrangements and that the key objectives for the delivery of the correct product within the correct market. It has also reinforced to many that the registered provider side has a significant skill set in looking at how to approach tenure and place making and the ability to bring on board alternative approaches to maintaining the joint venture objectives. These can range from the obvious of tenure changes and the relationships with key authorities to one of the more important skills of objectivity and looking at the larger long term position from business that are long term asset holders.
In the current market we would recommend that the original key fundamentals in relation to assessing a joint venture opportunity/approach are still followed:
Take the time to get to know your JV partner – The importance of knowing their financial and organisational goals can be of vital importance. If their business measures success in a different way then this can drive short term decisions for returns. Our experience tells us that there is quite often a way of finding common goals however, those early discussions can help to set the tone for a project and reference points for decision making.
Understand the cells behind the business plan – Whilst one party may take the lead for the construction of the project it is essential that both sides are clear on the requirements for the scheme and the timing and sequence for delivery. Organisations should take an honest look at their internal resources and skills in assessing the requirements for the delivery of a project. If external skills are required then engage at an early stage to ensure that everyone is starting from a similar point.
Be clear on responsibilities and fees – The common reason for matters being escalated at JV boards often stems from the matter that both sides thought the other side was covering or aware of. Transparency and ownership are key requirements.
Consider what happens if it was to go wrong – Agree mechanisms for if parties do not agree. It is essential that parties accept that in a default/deadlock situation that neither party is likely to end up in a preferred position and that the documentation represents a balanced and fair approach. The best mitigation is to make sure you really take the time at the first matter above- get to know each other. Appreciate in the current world that may require a few video calls – at least you get to see the state of their lockdown hair cut as an ice breaker. Market slow down provisions in relation to services to the JV may wish to be considered.
Joint ventures are definitely here to stay and the growth and application to different parties and sectors is showing no sign of stopping.For further information or assistance, please contact Jonathan Corris, Jonathan Jarvis or Joanna Bouloux.