Month: January 2016

Once the land owner and financier mutually agree to undertake a joint venture, below are key points that should drive the joint venture to success.

Registration of a Limited Liability company special purpose vehicle.

This is a limited liability company where both the land owner and financier will own shares depending on each contribution.
The company should be incorporated in such a way as to enable ease of solving issues relating to tax, and enabling ease of selling of individual shares within the company.

Feasibility study with impressive off plan sales.

An indepth feasibility study that outlines the best land use for the area that yields maximum profits needs to be carried out. www.a4architect.com offers feasibility study services to enable this. Once the most feasible use is established, off plan sales through advertisements should be done to test the waters and see the market response. If the market response is good, with at least 10% successful off plan sale, this means the feasibility study is perfect and no major changes are envisioned. If the market response is not good, the buyer response is then used to alter the designs to enable it to attract potential buyers to their liking. With good offmplan sales, banks will feel more confident to lend the bridging finance that is required to construct the project to completion.

Optimum architectural design to cater for mixed use developments.
The architectural design should be optimised such that the commercial parts of the buildings dont interfere with the residential parts in the case of mixed use developments. The architects should also design such that the residential units for sale do dont interfere with the residential units for rent, due to the differences in privacy aspects for both.

Joint Venture funding negotiations.

Land owners should be prepared for lenghtly funding negotiations between them and the financiers. Use of registered property valuers, quantity surveyors and architects for advisory services in therms of land value, construction costs will go a long way in enabling smooth negotiations.

Decision making and Project Mnagement.

Use of international best practice methods in construction project management will go a long way in ensuring success. Use of FIDIC or JBC construction contracts is a good starting point. The contractor, client and consultants can then follow the contractual agreements as outlined.

Arbitration and exit mechanisms.

Use of international best practice in dispute resolutions such as expert arbitration whereby the 2 conflicting parties each select an arbiter to help find a solution should be included in the contract. The contract should also outline exit mechanisms between the two parties if either party deems fit to sell off all or part of the shares in the limited liability company.

Architect Francis Gichuhi Kamau.
info@a4architect.com

Joint venture investments in real estate around Nairobi has now become a common feature. A joint venture is a marriage of convenience between a land owner and a financier. Each one has something that the other lacks eg the land owner has land but no funds and technical know-how to construct, the financier has the funds but no suitable land to build on. They therefore meet at a point of mutual understanding and agree to work together towards a common goal.

Rental income.

The land owner has the option of selling off the raw land but with a joint venture development , he has the ability to earn more money through sale or earn monthly rent from the renting of his share of the total joint venture construction project. Its a basic fact that bare land does not bring in income unless its developed ,leased or sold.In a joint venture development, the land owner gets the advantage of having his cake and eating it, where he can opt to retain his share and rent it out or sell part or all of his share. Most financier usually opt to sell 100% of their share.

Joint venture agreements.

Its important that both parties, ie the land owner and the financier, take their time to deeply understand the nitty gritty of the agreements to enable smooth sailing. Its not uncommon especially for the land owners to realize they need to change a few aspects right in the middle of the construction phase, which if not well arbitrated, can lead to unnecessary litigation and slowing down of the construction process as witnessed in the Four Ways junction project along Kiambu road recently.

A public disagreement usually translates to a loss to both parties, therefore, prior detailed understanding is very crucial to prevent this.

Architect Francis Gichuhi kamau.
info@a4architect.com

Joint Venture financing options are a good way of unlocking land potential in Kenya, where land value keeps rising by the day.

A few incidences have been recorded where the land owners have been left holding the shorter end of the stick after a joint venture deal.
A few land owners whom i have met have said that their lawyers have advised them that they have no case since their agreements and contracts were placed clearly in black and white , so they just shoulder the loss unto themselves. www.a4architect.com offers advisory services to land owners so that by the time they sit on the negotiating table with the financiers, they can strike a good bargain from a point of knowledge and information.

Land owners need to review the below factors to ensure a win win situation.

Total cost of project.

Land owners need to know how to itemize all construction related costs . Once this is done, the land owner can then compare the land value and any other contribution to the total cost and compare this to the amount that the financier is contributing. This will come in handy on discussions as to how to spit profits later on.

Sharing of profit.
The contribution that each partner, namely land owner and financier, put on the table should ideally be a good start off point for discussions as to profit sharing. This is also the basis of the loss sharing in the unfortunate event that the deal goes towards a loss.

Project Management.
Land owners need to be cognizant of the project management and decision making through out the project. Professionals well versed with various aspects are usually the best bet, eg property and conveyancing lawyers, land valuers, architect,s,engineers, property agents, all licensed and with at least 10 years of experience, are a sure bet towards success of the project.

Architect Francis Gichuhi kamau.
info@a4architect.com

Joint venture financing comes in handy when an owner of prime land does not have the finances to construct. Usually, land is around 15 to 20% of the total cost of the project. For the land owner to fund the rest of the 80%, the huge amounts make it a Herculean task to fund, hence the need to seek a joint venture financier.

Same vision and Goals.

The land owner and financier will need to have the same vision and goals, having soul-searched and realized that without either, they cant realize their dreams of construction. The land owner will need to have at least tried to seek finances or bank loans and realized that the minimum 20% of construction cost required by most banks for them to release the 80% of construction cost, plus ability to service huge monthly interest, is a tall order for them hence the need for a financier.

Creating systems to enable arbitration.

Joint venture project successes are dependent on both the land owner and financier to resolve any upcoming issues in the best way possible. Valuation of land is best agreed when both partners hire independent certified land valuers to advice on land. For construction costs, when both partners hire independent architects and quantity surveyors, they will be able to deeply understand the science of determining construction costs, hence improving the mutual trust levels.
The reliance of certified experts for arbitration purposes, where both parties can each hire a consultant, then the 2 consultants meet at a round table and brain storm, is the best method to resolve conflicts before issues move to litigation. In litigation, our courts still need alot of new laws and precedents in regards to joint venture issues hence they are a last resort when all forms of arbitration and negotiations have failed.

Success rate.
Joint venture financing remains one of the most ingenious methods of financing construction projects in Kenya. www.a4architect.com offers advisory services on matters joint venture , from linking land owners to financiers, to managing joint venture projects to completion.

Architect Francis Gichuhi Kamau.
info@a4architect.com

Joint Venture financing in construction projects is whereby the land owner only contributes the land, with no other financial contributions, and the financier comes up with funds, to enable the two to realize a construction project.

At www.a4architect.com, we keep a data base of land owners who are willing and seeking Joint Venture financing. We also keep a database of financiers seeking out land owners. https://www.a4architect.com/land-4-sale-joint-venture/

The process is relatively simple, the land owner comes up with an unencumbered land, of which a4architect.com can then undertake feasibility studies to determine the maximum potential for the development. With this feasibility report and architectural drawings, a meeting is then arranged with potential financiers for the negotiations to begin.

After agreements, the construction commences and finally, after completion, the financier sells off their share and the land owner then can rent out their share while the cost of construction is offset by selling off the shares that are equal to the cost of construction.

The land owner gets a share that is equal to at least 50% of the profits plus cost of the land.

Notable Joint venture projects around Nairobi are Runda Park along Kiambu road, Sunrise estate at Athi river and Parklands Luxury Gardens in Ngara.

Size of the land is crucial in that larger lands are more suitable and attractive to financiers since its easier to benefit from economies of scale. Lands in prime locations, near tarmac, in major towns are also very suitable for this. At www.a4architect.com, we can conduct quick feasibility to determine of your land fits within this scenario.

Architect Francis Gichuhi Kamau.
info@a4architect.com

Several partitioning options exist depending on space use and budget.

Blockboard and MDF Board partitions.

This method uses block boards and MDF Boards. There are made of wood chippings to create a 1.2 m by 2.4 m panel. This is one of the least expensive and most common. Its used mainly because the materials are easily and readily available around Nairobi.

Its also easier to cut into fancy shapes and styles.

Gypsum wall partitions.

These are panels made from gypsum with a paper covering at the top.
These are good for office space partitioning due to their high fire and sound resistance. They r easily eroded by water so they should not be used in wet areas.

Glass partitions.

Glass is a common internal partition feature. Its anchored and supported by alluminium framing. The thickness and type of glass can vary depending on the space use. This gives an elegant appearance and is mostly used on office type buildings.

Glass can also be used frameless, through use of special toughened glass types.

Frameless glass walling is also a common feature in stylish bathrooms where a lees is more design approach has been used.

Fibre Cement boards.

These are panels that are made of polysteryne sandwich infill and cement plaster on the outside. They have good thermal and sound capabilities and hence very suitable for habitable spaces such as bedrooms .

They have excellent water proofing capabilities so they can also be used in bathrooms and wet areas.

Glass blocks.

These are water proof, strong and allow for light to flow from one room to the other. They also give an appearance of class to the interiors.
These are perfect for creating niche areas of interest eg reception areas, outside gardens etc.

Metal sheet partitions.

These are strong, sound and fire proof.

These are used where dismantling is anticipated since they are easily dismantled. These are also good in sensitive material storage eg food and drugs.

Architect Francis Gichuhi Kamau.
info@a4architect.com