What a capital partner looks for before a joint venture

A joint venture partner is buying into two things: the deal and the sponsor. Most sponsors prepare for the first and underestimate the second. The partners who write the largest checks usually decide on the sponsor first.

The sponsor

• Track record that matches the deal. Similar asset type, size, and business plan. Show the full record, including the deals that went sideways and what you did about them.
• Alignment. How much of your own capital is in the deal, and how your fees and promote are earned.
• Team and systems. Who manages the property, who handles construction, who reports to investors, and how.
• Reporting discipline. Partners want to know what reporting looks like before they commit, not after.

The deal

• A business plan in plain numbers. Purchase price, total capitalization, the plan to create value, and the timeline.
• Underwriting that a skeptic would accept. Actual trailing income, market expenses, reserves, and taxes at the price being paid. Rent growth and exit assumptions supported by comparables.
• A downside case. What happens if lease up takes longer, rates stay higher, or the exit value is lower. Partners trust sponsors who show this without being asked.
• Debt that fits. Terms, maturity, and covenants that work with the business plan.

The terms

Most JV negotiations center on a few points: the preferred return, the promote and its hurdles, fees, major decision rights, and what happens if the sponsor needs to be replaced. Know your position on each before the first meeting, and know which ones you will trade.

Common reasons partners pass

• The underwriting relies on assumptions the sponsor cannot support.
• The sponsor's capital in the deal is too small to show conviction.
• The debt does not match the business plan.
• Reporting and controls are not ready for outside capital.

How we help

We help sponsors prepare the package, pressure test the underwriting, and introduce the opportunity to partners whose mandate fits. If you are planning a raise for a specific deal, start a conversation.

Thomas Capital Holdings does not sell securities or solicit investors on behalf of clients. Any offering is made by the issuer under its own documents and applicable law.