The affiliated developer is a related-party dealing in every agreement it signs.

A development platform is formed around a developer, and in the Gulf the developer is often the reason the platform exists: it holds the relationships with landowners, the standing with the authorities, the contractors and the record. When the developer is the manager's affiliate, owned by the same principals or controlled by the same group, the platform has a conflict built into its foundation, and the conflict recurs in every document the developer signs with the platform's vehicles: the joint venture agreement, the development management agreement, the construction contract where the developer's affiliate builds, the in-kind contribution of the parcel, the promote, the sale of the completed building, the property management afterwards. Each is a related-party dealing. Each is handled by the constitution's route, with the developer's terms tested against an unrelated developer's on evidence, approved by the investors' committee and minuted, or it is not handled, and a platform whose developer signed fifty agreements without the route has fifty voidable dealings that the buyer at exit lists, prices and requires ratified before it completes.

This note sets out why the affiliated developer exists and what it brings, the agreements and the conflict in each, the test against an unrelated developer, the committee's part, the development charge and the promote as the dealings the test bears on most, the in-kind contribution, the construction contract, the sale and the property management, the reporting, the buyer at exit, the regulator, the lender, the onshore interface, a comparison, a worked platform as a type, cases, what each party holds, the sequence, questions, terms and what to read.

Why the developer is affiliated

A manager that raises a development platform without a developer has capital and no capability; one that partners with an unrelated developer has capability it does not control and economics it shares. A manager whose principals own a developer has both, and the platform is the vehicle by which the developer's pipeline is funded by third-party capital with the manager's economics on top. The register that subscribes knows this, because the memorandum says so, and the register accepts the conflict as the price of the capability. Acceptance of the conflict is consent to the route that handles it, and not to the dealings.

The agreements

The joint venture agreement forms the vehicle that holds each parcel, with the developer as minority holder and the platform as majority, and fixes the governance, the economics and the exit. The development management agreement appoints the developer to manage the project for a charge. The construction contract, where the developer's affiliate is the contractor, fixes the price and the programme. The in-kind contribution transfers the developer's parcel into the joint venture at a figure. The promote, in the joint venture agreement, fixes the developer's share of gain above a hurdle. The sale agreement, where the developer's affiliate buys the completed building or handles its sale on the joint venture's behalf, fixes the exit price. The property management agreement, where the developer's affiliate manages afterwards, fixes a charge for the building's life. Seven documents, seven conflicts, each a related-party dealing at the joint venture and at the platform.

Why every agreement and not the first

Managers that accept the affiliated developer as a conflict tend to handle it once: the committee approves the first joint venture's terms, with the developer's economics, and the manager treats the approval as the template for the rest. But each joint venture is a new parcel, a new business plan, a new construction contract, a new in-kind figure and a new promote on a new hurdle base, and the first approval tested the first project's terms against the first project's evidence. The second project's terms may be the same and its evidence different, because the market moved or the parcel is of a different kind; and a committee that approved the first has not read the second. The route runs per agreement because the test is per agreement, and a template approval is the developer's terms applied without evidence to projects the committee never read.

The principals on three sides

The manager's principals hold the manager, which receives the platform's charge and carry; the developer, which receives the development charge and the promote; and often the contractor and the property manager, which receive the construction price and the management charge. The investor's return is what is left after all of them, and the principals decide, at the manager, what the developer is offered. The committee's reading of each agreement is the only reading in the structure by someone the principals do not own, and its approval on evidence is the only test of terms the principals set for themselves. That is the reason the constitution reserves every dealing and the reason the committee's evidence is commissioned from outside.

The developer's pipeline and the allocation question

An affiliated developer has a pipeline of parcels and projects, and the platform is one of the places it can take them. The developer's other vehicles, its own balance sheet, a second platform with another manager, are all claimants, and the developer's allocation of its pipeline among them is a conflict the platform's register reads. The platform's document requires the developer to offer the platform each project of the platform's kind first, within a period, and to record its reasons for taking a project elsewhere, and the committee reads the developer's pipeline report each quarter. A developer that takes its best projects to its own balance sheet and its difficult ones to the platform has allocated against the register, and the pipeline report is the evidence.

The test against an unrelated developer

Each agreement's terms are tested against what an unrelated developer would have given for the same project, on evidence the committee can read: for the development charge, quotations from unrelated developers or market surveys of the charge for the kind; for the promote, the terms of joint ventures between unrelated parties in the market; for the construction contract, competitive tenders; for the in-kind parcel, the platform's valuer; for the sale, a marketing process or a valuation; for the property management, quotations. The evidence is commissioned by the manager and read by the committee, and the committee approves on it or not. Terms better for the developer than the evidence supports are terms the committee declines or the developer improves.

The committee's part

The platform's constitution reserves every dealing with the affiliated developer to the committee, above no threshold, because the developer's dealings are the platform's business and a threshold would exempt most of them. The committee receives each agreement in draft with the evidence, on notice, and approves, conditions or declines. The manager's representative does not vote. The anchor, if it co-invests beside the joint ventures, declares and abstains. The minute records the evidence, the questions and the decision, and the report carries the dealing in its table. A committee that approves the first joint venture and delegates the rest to the manager as within its form has delegated the route to the conflicted party.

The development charge and the promote

The development charge and the promote are where the test bears most, because they are the developer's economics and the manager's principals own the developer. A development charge above the market's for the kind is the manager's principals paid twice: once through the platform's charge and carry and once through the developer's. A promote above the market's, or on a hurdle below the platform's, is the same. The committee reads the two together with the platform's own economics, because the investor's return is what is left after all three, and the manager's principals receive all three. The evidence for each is the market's terms, and the committee's approval is on the evidence.

The in-kind contribution

A developer that contributes its parcel to the joint venture in kind, at a figure, sets its equity share and its hurdle base by the figure, and a figure above the parcel's supportable value is equity the developer did not pay for. The platform's valuer, appointed by the committee, supports the figure; the committee reads the valuer's special assumptions, because a parcel valued on an assumed consent is a figure the consent may not support; and the onshore transfer is registered at the figure the onshore regime records. The in-kind figure is the first number in the joint venture's life and the committee reads it first.

The construction contract

Where the developer's affiliate builds, the construction contract is a related-party dealing whose test is a tender: unrelated contractors price the same scope, and the affiliate's price is read against them. A contract let without a tender, because the affiliate is the developer's own and the programme was pressing, is a contract whose price nobody tested, and the cost overruns that follow are the platform's. The committee approves the contract on the tender and approves variations above a threshold on the same basis, and the development manager's certificates are read by a quantity surveyor the committee appoints.

The sale and the property management

At exit, a sale to the developer's affiliate, or handled by the affiliate on the joint venture's behalf, is the last dealing and the one where the price is the platform's return. The test is a marketing process open to unrelated buyers, or a valuation by the committee's valuer, and a sale to the affiliate at the valuer's number is a sale the committee approves on the number and the buyer of the platform's other positions reads. Property management by the affiliate after the sale, where the platform retains the building, is a framework dealing approved with a cap and a period and renewed annually.

The reporting

Each dealing with the developer is reported in the platform's quarterly table: the agreement, the relationship, the terms, the evidence, the route, the date. A platform with an affiliated developer has a long table, and the table's length is the register's evidence that the route ran. An annual report that says the developer is an affiliate and dealings with it were approved has reported the relationship and not the dealings, and the register that reads it cannot read the committee's work.

The buyer at exit

A buyer of the platform's positions, at a continuation sale or a trade sale of the joint ventures, diligences every agreement with the developer for the route: the minute, the evidence, the report. Each agreement without them is listed as voidable, and the buyer requires ratification by the committee before completion, takes a warranty from the platform and an indemnity from the manager, and discounts the price for the risk that ratification does not cure the regulatory breach or that a holder sues. A platform with fifty unhandled agreements is a platform whose exit is conditional on fifty ratifications.

The regulator

The regulator reads a platform with an affiliated developer as a structure whose conflicts rules run at every step, and inspects for the conflicts register, the route, the minutes, the evidence and the tables. A platform whose memorandum disclosed the affiliation and whose minutes show nothing has met the disclosure duty and no other, and the finding names the manager's principals as the beneficiaries of the unhandled dealings.

The lender

A construction lender to a joint venture reads the development management agreement, the construction contract and the promote for what ranks beside or ahead of it, and requires the developer's charge to be subordinated to its debt service and the promote to be paid only from equity proceeds. A lender to the platform reads the same agreements for the cash that reaches its borrower, and requires the manager's representation that each was approved by the route.

The onshore interface

In a register jurisdiction the joint venture is an onshore company whose board approves each agreement with the developer under the onshore companies law's conflicts rules, with the developer's director declaring and abstaining, and some regimes require the shareholders' approval or a filing for dealings with a director's related company. The onshore process runs with the platform's, and onshore counsel drafts the joint venture's agreement so that both routes are built into it: the developer's director abstains at the joint venture's board, the platform's nominee directors approve on the committee's approval, and the minute records both.

By agreement · by test	The conflict	The evidence	The route	What a buyer reads
Joint venture agreement	Governance and economics set with the affiliate	Market joint venture terms	Committee	The minute and the evidence
Development management agreement	The charge to the affiliate	Unrelated developers' quotations	Committee	The charge against the quotations
Construction contract	The price to the affiliate's contractor	Competitive tender	Committee, and variations above a threshold	The tender
In-kind contribution	The parcel's figure	The committee's valuer	Committee	The valuer's special assumptions
Promote	The affiliate's share of gain	Market promote terms	Committee	The hurdle and tiers against the market
Sale to the affiliate	The exit price	Marketing process or valuation	Committee, and the register where the constitution requires	The process
Property management	The charge for the building's life	Quotations	Framework, renewed annually	The framework and renewals

A platform, as a type

A platform's memorandum names the developer as the manager's principals' company and discloses the seven agreements it will sign with each joint venture. The constitution reserves every dealing with the developer to the committee above no threshold. The conflicts register opens with the developer and its contractor and property manager. Each joint venture agreement is approved on market joint venture terms; each development management charge on three unrelated developers' quotations; each construction contract on a tender with the committee's quantity surveyor certifying; each in-kind parcel on the committee's valuer; each promote on the market's terms at the platform's hurdle; each sale on a marketing process; property management under a framework renewed annually. The table in each quarterly report lists the dealings. The regulator inspects in year four and reads the minutes. At exit in year eight the buyer reads fifty agreements with fifty minutes and conditions nothing.

The structure paper's page

The structure paper carries a page on the affiliated developer: the reason the conflict was not prevented, the seven agreements and the evidence for each, the reservation above no threshold, the committee's appointments, the built-in routes in the joint venture agreement, the developer's pipeline obligation, the reporting table, the onshore process, the lender's subordination and the evidence file's form. The page is written before the memorandum because the memorandum's disclosure is drafted from it, and it is the page the committee reads at its first meeting.

The unrelated developer beside the affiliate

A platform that works with both an affiliated developer and unrelated developers has, in the unrelated joint ventures, the evidence for the affiliated ones: the terms an unrelated developer gave the same platform for the same kind of project. The committee reads the affiliate's terms against the unrelated developer's, and a platform that engages one unrelated developer for that reason has bought its evidence at the price of sharing a project. The allocation of projects between the affiliate and the unrelated developer is a conflict too, and the pipeline report covers it.

The second platform's reading

A manager's second platform is raised from a register that read the first platform's tables, sat on its committee and saw the buyer's diligence at exit. A first platform whose developer's agreements each had a file is a platform whose developer the second register accepts on the same route; one whose exit took a year of ratifications is a platform whose developer the second register declines or prices. The affiliated developer's standing in the market is the manager's case for the second platform, and the first platform's evidence files are what the case rests on.

The developer's departure

The developer may cease to be the manager's affiliate, by a sale of the developer or a change in the principals, and the platform's document says what follows: the reservation continues for agreements signed while the affiliation stood, the framework dealings are re-tested, and a new developer is appointed under the route if the old one goes. The reverse, a developer that becomes an affiliate mid-life because the principals buy it, makes every existing agreement a related-party dealing from that date, and the committee reads each for whether its terms are still the market's.

Four cases, as types

A platform discloses the affiliated developer in the memorandum and reserves dealings above a threshold set at the platform's level. The joint ventures' agreements fall below it. At exit the buyer lists every development management agreement, construction contract and promote as voidable, and the exit takes a year of ratifications.

A platform's committee approves each joint venture agreement and leaves the construction contracts to the development manager, which is the developer. The affiliate builds every project without a tender, the overruns are the platform's, and the investors' claim at the platform's end is for the price of every contract.

A developer contributes three parcels in kind at figures the manager accepted on the developer's own valuer. The committee's valuer, appointed later at the lender's insistence, supports two of the three, and the third joint venture's equity shares are renegotiated under threat of unwinding.

A platform runs the route on every agreement, with the evidence and the minute, and reports each. The developer's economics over the platform's life are the market's, the investors' return is what the memorandum's two waterfalls implied, and the manager's principals were paid three times on terms a committee tested each time.

What each party holds

The manager holds the disclosure, the conflicts register, the evidence for each agreement and the reporting.

The developer holds its agreements, its declarations at the joint venture's board and its terms against the evidence.

The committee holds the approval of every dealing, the valuer and the quantity surveyor it appoints, and the minutes.

Counsel holds the constitution's reservation, the joint venture agreement's built-in routes and the onshore process.

The lender holds its subordination of the charge and the promote and its representation.

The buyer holds its diligence and its conditions.

Where it surfaces

It surfaces at the memorandum, when the developer is named and the register reads why the conflict was not prevented. It surfaces at the first joint venture, when the developer's template arrives with its own terms. It surfaces at the first construction contract, when the affiliate's price has no tender beside it. It surfaces at the in-kind contribution, when the developer's valuer and the committee's differ. It surfaces at the first sale, when the affiliate is the buyer. It surfaces at the lender's diligence, when the construction lender reads the development charge's ranking. It surfaces at the regulator's inspection, when the table is asked for. And it surfaces at exit, in the buyer's list.

The cost of getting it wrong

A platform whose developer's agreements were not handled has an exit conditional on their ratification, a price discounted for the risk, a warranty the platform gives and an indemnity the manager gives. It has a regulator's finding naming the principals. It has investors with a claim for each contract's price against the evidence that was never gathered. And it has a manager whose second platform will be raised from a register that sat on the first's committee. The cost of the route is a meeting per agreement and the evidence a prudent manager gathers anyway; the cost of its absence is the exit.

The committee's evidence file

The committee keeps a file per joint venture: the joint venture agreement and the market terms it was tested against, the development management agreement and the quotations, the construction contract and the tender, the in-kind figure and the valuer's report, the promote and the market terms, the sale and the process, the property management framework and its renewals, and the minutes of each approval. The file is the buyer's diligence, assembled in advance, and a platform that hands the buyer the files at exit has an exit without conditions. The administrator keeps the files with the minute books, and the manager's compliance confirms each quarter that each agreement signed has a file.

A timeline, as a type

At the platform's close the memorandum names the developer, the constitution reserves every dealing, the conflicts register opens, and the committee appoints the valuer and the quantity surveyor. In year one the first joint venture is approved on market terms, its in-kind parcel on the valuer, its development management charge on three quotations, its construction contract on a tender. In year two the second joint venture, with a different parcel kind, is tested on fresh evidence and its promote is revised downward before approval. In year three the developer's pipeline report shows a project taken to its own balance sheet and the committee reads the reasons. In year four the construction lender subordinates the development charge and the regulator inspects the files. In year six the first building is sold by a marketing process in which the affiliate bid and lost. In year eight the buyer of the platform's positions reads the files and completes without conditions.

The sequence

1. The memorandum discloses the affiliated developer and the agreements it will sign; the constitution reserves every dealing with it to the committee above no threshold.
2. The conflicts register opens with the developer and its affiliates, and the committee appoints the valuer and the quantity surveyor.
3. Each agreement is drafted with the evidence its test needs and taken to the committee on notice.
4. The developer's director abstains at the joint venture's board; the platform's nominees approve on the committee's approval; both minutes record it.
5. Each dealing is reported in the quarter's table.
6. At exit the buyer reads a complete record.

Questions a manager asks

Is the affiliated developer worth the process. If the developer's pipeline and standing are the platform's reason, yes; the process is a committee meeting per agreement and the evidence is what a prudent manager would gather anyway.

Can the committee approve the developer's standard terms once. As a framework for the development management charge and property management, with a cap and annual renewal; each joint venture, promote, in-kind contribution, construction contract and sale is approved on its own.

What if the tender is won by the affiliate. The affiliate's price at or below the unrelated tenders is the evidence; the contract is approved on it.

Who appoints the quantity surveyor. The committee, so that certificates under the construction contract are read by someone the developer does not pay.

Does the anchor's co-investment beside the joint ventures change the route. The anchor abstains on the committee for those joint ventures, and the quorum is computed without it.

How is the developer's economics total read. The committee reads the development charge, the promote and the platform's charge and carry together, because the manager's principals receive all of them.

Terms used

Affiliated developer: a developer owned or controlled by the manager's principals or group.

The seven agreements: joint venture, development management, construction, in-kind contribution, promote, sale and property management.

Test against an unrelated developer: evidence that the affiliate's terms are what an unrelated developer would have given.

Reservation above no threshold: the constitution's requirement that every dealing with the developer goes to the committee.

Quantity surveyor: the committee's appointee certifying construction cost and variations.

Ratification: the committee's later approval a buyer requires for unhandled dealings, which cures voidability and not the breach.

What to read

The memorandum's disclosure; the constitution's reservation; each joint venture agreement and its built-in routes; the evidence files; the committee's minutes; the quarterly tables; the onshore companies law on directors' conflicts. On this site, the developer and platform rooms under Land and the governance room under Where complexity arises.