Commercial property lending in the United States continued upward momentum in 2014 and is expected to stay strong in the year ahead. This quick guide helps you jump start your commercial real estate strategies for joint venture financing for 2015. Learn more: http://www.us.jll.com/united-states/en-us/services/investors/capital-markets/debt-and-equity-finance

1. Top 5 things to know: Joint-venture financing
The guide to financing in commercial real estate
Spring 2015

2. Commercial property lending in the United States continued its upward momentum in 2014 and is expected to stay strong
in the year ahead. Liquidity in the debt markets is pushing core pricing, and strong activity coupled with aggressive lending
and competitive structures on the debt side is supporting price strength further out the risk curve into value-add and
opportunistic plays mainly seen in the rising secondary markets. Demand on the equity side from institutional, private funds
and foreign investors is also expected to remain strong in 2015. The next three years will bring an unusually high wave of
loan maturities, a majority of which can be recapitalized without additional equity, further driving lending volumes. Banks, life
insurance companies and CMBS lenders will all become increasingly competitive, driving growth across more markets and
a greater number of geographies.
Thomas O. Fish
Executive Managing Director / Co-Head
Capital Markets
+1 713 888 4047
Tom.Fish@am.jll.com
Mike Melody
Executive Managing Director / Co-Head
Capital Markets
+1 713 888 4089
Mike.Melody@am.jll.com
Tom Melody
Executive Managing Director / Co-Head
Capital Markets
+1 713 888 4053
Tom.Melody@am.jll.com
An introduction

3. 1
Before an investor focuses on deal terms, it is
important to first ensure the venture is between
two partners that have aligned interests and
similar end goals. While everyone wishes for
their pro forma and business plan to unfold
precisely, odds are there will be bumps along
the road. Mutual trust and respect are critical for
any partnership, and joint ventures often sour
when one party does not perform as anticipated.
Does the operating partner offer local market
and leasing/management expertise, or perhaps
a strong vision to reposition the property? What
can the equity partner offer beyond the necessary
ability to write checks? Can the partner’s strong
banking relationships open more doors to the
financing? Is there a good pipeline that might
be a fit for the venture down the line? The most
successful joint ventures are first founded on a
meeting of the minds.
Joint-venture financing:
The right stuff

4. Joint-venture financing:
If you build it…2
With fundamentals improving across all real
estate classes, it appears we are in a peak
development period. Many developers are
expanding and diversifying their capital base
by turning to new equity partners to fuel their
pipelines. Institutional equity has been filling
this need, with increasing appetite coming from
offshore investors.

5. Joint-venture financing:
What’s in it for fee?3
There is a delicate balance in any joint venture
between rewarding an operator for efforts
(acquisition, leasing, management, etc.) and
ensuring that the partner is not taking too many
chips off the table. If the fees are misaligned,
there is a chance the operating partner can get
their cash out and not have much, if anything, to
salvage down the road if things go poorly. When it
comes to liquidity events (sale or financing), it’s
important that both parties still have incentive and
are chasing a larger goal.

6. Joint-venture financing:
This is major4
Operators and developers generally recognize
that they are giving up control when a partner
is brought into the fold, but it is sometimes
misunderstood just how much is relinquished.
Except when creating a liability under a
guarantee for the operator, the equity partner
calls the shots with regard to financings, business
plans, leasing, budgets, capital expenditures,
bankruptcies and sales, among other key
events. This is why the first point referenced
above is so critical.

7. Joint-ventures financing:
I guarantee it5
In a venture, the operating partner or developer is
expected to guarantee the non-recourse carve-outs in
a financing. If those obligations can’t be met at any
point in the life of the venture, the economics shift.
Don’t expect the equity partner to step into a liability
without compensation. That just won’t happen…I
guarantee it.

8. Reid McGlamery
Executive Vice President
Capital Markets
+1 213 239 6132
Reid.McGlamery@am.jll.com
Thank you
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