Funding partnerships in real estate projects is where developers are looking for funds, rather than loans to complete a development. Usually, an investment is made on a list of criteria and stages of a development.
The developer will usually have the land reserved, purchase subject to the planning permission being granted by the local UK authority that will agree the scope and mix of the development.
The funding partner may structure the investment in many ways, depending on the desired return and outcome. The pay back can be an allocated number of units that the funding partner can retain and lease/rent or can sell on. The units will be at a considerably lower cost, such as construction costs and offer a very high return on investment.
A funding partnership can used to structure equity investments from investors, that will purchase an equity investment (shares) in the development company and the subsequent development costs being provided by multiple investors. The exit strategy tends to be based on the renting of a development and creating an income generating asset that is then sold to an investment fund, such as brand-new student accommodation developments.
Funding partnerships can also be a single investor providing the development funds, and having an exit strategy in place, such as rent the development and again look to sell it on to an investment fund. There are many investment funds who are now investing in Build to Rent projects, as they offer an income stream through the rents. As the buildings are new, they have a high tenant demand together with lower operational costs and the increasing asset value make them excellent investment choices.
Funding partnerships usually offer an ROI that is much greater than typical buy to let property investments, and these involve partnerships and corporate structures. As with all investments there are associated risks and investors should carry out the necessary due diligence and seek professional advice.
Magnate Assets has a number of developers that are seeking funding partnerships for future projects and if this is of interest to you then please register your interest on this page, or book an appointment here.
Example -
Development Funding requirement in the North of the UK, student accommodation. Planning consent has been granted, the investment required over £35m, expected rental yields of more than 6%, sell on ROI more than 40%.
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