Land · room 05 of 07
The developer.
A developer needs land it does not have to buy outright, a programme it controls, and an exit it can price. A platform needs a developer it can hold to a budget and a date, a position senior to the developer's, and the right to step in. The landowner, if still present, needs the value event to arrive. Four structures join those needs, and the choice between them is the choice of where control sits.
What follows is what each party brings to the table, the four structures compared, the control matrix, what happens when the programme overruns, how the developer leaves, and what each side supplies before a line is drawn.
Land · seven rooms
01 · The three parties
What each needs, and what each fears
Three parties sit at a land structure, and each is protecting a different thing.
The structure works when each party's position is written from its own fear rather than from the others' confidence. The rows set out the positions as they arrive.
Needs a defined exposure, a developer who delivers what the exposure statement promised, a senior position in the capital of every parcel company, and an exit it controls. Fears a developer whose interest is in the building rather than the sale, a budget that becomes a negotiation, and a programme that outruns the platform's term.
Needs land without tying up its capital in it, control of design and delivery, a promote that pays for its skill, and an exit it can fund its next scheme from. Fears a platform that second-guesses the programme, a step-in right with no threshold, and a buy-out formula it cannot price.
Needs the value event to arrive on the parcel it contributed, a valuation it can trust, and a class that pays it when the parcel pays. Fears being the first in and the last paid, and a programme that changes after the parcel is in.
Not at the table, and present at every term: the construction facility sits on the parcel company, and its consent reaches the programme, the contractor, the sales regime and every change of control above it.
02 · Four structures
Compared on where control sits
Four structures join a platform to a developer, and each settles control in a different place.
The table compares the four on what the developer holds, what the platform holds, when money moves and where the programme risk lands. A platform commonly uses two of them across its parcels.
| By structure · by position | What the developer holds | What the platform holds | When money moves and who carries the programme |
|---|---|---|---|
| Option and development agreement | An option over the parcel, exercisable on consent or on a date, and a development agreement that fixes the programme, the budget and the developer's payment on delivery. | The parcel, until the option is exercised. The platform keeps title through the entitlement period and sells to the developer, or to the joint venture, at the value event. | Money moves on exercise. The developer carries the programme after exercise; the platform carries the consent risk before it. The simplest structure and the one most landowners recognise. |
| Land-for-equity joint venture | Shares in a joint venture company alongside the platform, and the development agreement with it. The developer contributes the programme, the platform contributes the parcel at a valuation. | The majority of the joint venture, a senior class in its capital, the step-in right, and consent over the matters the control matrix reserves. | The parcel moves at formation; equity is drawn against the budget. The joint venture carries the programme, and both parties carry it in proportion: the point, and the risk. |
| Forward funding | A contract to build on the platform's land, funded in stages by the platform against certified progress, with the developer paid a margin on completion. | The parcel and the building throughout; the developer never holds title. | Money moves monthly against certificates. The platform carries the programme through the developer's covenant, the contractor's bonds and the step-in right. Used where the platform holds for income and the developer is a builder rather than a partner. |
| Forward purchase | The parcel, bought from the platform at a price fixed now, with the platform contracted to buy the completed building at a price fixed now. | A contract to buy, secured over the parcel, and a deposit structure. The developer holds title and carries the programme and the financing. | Money moves at completion. The developer carries everything, and prices it. Used where the developer is strong and the platform wants a completed, income-producing asset it can hold. |
03 · The control matrix
Who decides what, and what needs whom
The joint venture agreement is a matrix: nine decisions, and for each the party who takes it and the party whose consent it needs.
A developer who holds every decision has a platform that holds only risk. A platform that holds every decision has a developer it is paying to agree with it. The matrix puts each decision with the party who bears its cost.
The developer, within a brief the platform approved at formation. Changes above a stated value need the platform.
The developer, against a baseline in the development agreement. A slip beyond a stated period is a reportable event, and beyond a longer one a step-in trigger.
The developer, within the approved budget and a contingency. A drawdown above the contingency needs the platform, and above a further threshold the investors' committee.
The developer appoints; the platform consents to the main contractor and to the form of bond.
The developer runs the sales regime under the state's off-plan rules; the platform sets the floor, the pace and the escrow position, and a sale below the floor needs the platform.
The platform, because the facility sits on its parcel company and its consent reaches everything. The developer may arrange; the platform signs.
Under the waterfall, on the administrator's calculation. Neither party decides; both verify.
The platform, after the developer's promote has crystallised. A disposal before completion needs both.
Either party's change of control is a trigger for the other's option to buy out, at the formula in the agreement.
04 · Overruns, delay and step-in
Written before the first certificate
Every development overruns something. The structure settles who carries it before anybody knows what it will be.
Four provisions, each with a threshold and a consequence, written at formation. A threshold settled after the overrun is a negotiation, and the party in possession of the site wins it.
The contingency first; then the developer's promote, which is reduced before any investor's capital is touched; then a further call on both parties in proportion, with a dilution formula for a party that does not fund.
A reportable event at the first threshold, a reduction in the promote at the second, a step-in trigger at the third. Delay the developer caused and delay the consent regime caused are distinguished, and the consent calendar in the parcel file is the evidence.
The platform's right to take over the development agreement, the contractor and the site on a trigger, with the developer's promote crystallised at the value to that date. The right exists so it is never used, and it is never used only when its triggers are clear enough to be feared.
The facility carries its own step-in, its own thresholds and its own consents, and the joint venture's provisions are drafted beside them so that the lender's trigger does not arrive first.
05 · The developer's exit
Three doors out
A developer leaves by one of three doors, and each is priced by a formula written at formation.
A developer that cannot price its exit prices the entry higher. The three doors and the formula on each are in the agreement before the parcel moves.
The promote crystallises on practical completion, or on the sale of the last unit, or on the first valuation after stabilisation, whichever the programme was built to. Paid from realised value under the waterfall.
The developer sells its joint venture shares, to the platform under a pre-emption at the formula, or to a third party the platform consents to. The formula is the unrealised promote at an agreed valuation basis, less a discount stated in the agreement.
Default, insolvency, change of control or a failed step-in. The platform buys the developer's interest at the formula, less the cost of the cure, and the development agreement passes to a replacement the platform appoints.
The developer's warranties on the building, its collateral warranties from the contractor and consultants, and its liability for the period it controlled the programme. The exit formula prices none of these; the agreement keeps them alive.
06 · What each side supplies
Before a line is drawn
Each side brings a file, and the structure is drafted from the two files rather than from the term sheet.
The rows set out what the developer supplies and what the platform supplies. A negotiation that starts before both files exist is a negotiation about a building nobody has described.
The programme with its consent calendar; the budget with its contingency and its basis; the record on comparable schemes, verified; the licences the state requires of a developer, and in the Gulf the registration that lets it sell off-plan through the escrow regime; the contractor's identity and the bonds it will give; and the financing it expects to arrange, with the lender's indicative terms.
The parcel file from the access room, with title, tenure, encumbrances and the consent position; the valuation at entry; the equity it commits and the class it holds it in; the exposure statement, so the developer knows what the platform may and may not hold; and the exit the platform intends, so the programme is built to it.
Where still present, the contribution agreement and its valuation, the consents it has obtained, and the history of the parcel that no registry records: the neighbours, the prior applications, the reasons the last scheme did not proceed.
The structure that holds the three files together: which of the four forms, the control matrix, the overrun provisions, the exit formulae, and the sequence that gets from the files to a signed agreement. The firm is appointed by one of the three and designs for that one.
07 · The binding constraints
Five, each attributed
Five constraints bind the developer interface. Each is created by one instrument and moved by one party.
The list the structure paper carries at this stage, with the party who can move each item named beside it.
Created by the land law of the state. Moved by the state alone; solved by choosing a form the registry records.
Created by the state's escrow and developer-registration rules. Moved by the regulator; solved by the developer's registration before the first sale, never after.
Created by the facility. Moved by the lender; drafted beside, and priced at entry.
Created by the fund regime: the share of assets under development the tier permits, and whether the developer may be a related party. Moved by the regulator; solved by the choice of form in the platform room.
Created by the constitution. Moved by the register; the programme is built inside it or the platform is the wrong one.
08 · Where it breaks
Failure points
Each of these was decided at the term sheet and found at the first certificate.
Five failures particular to the developer interface. None is cured by drafting after the event.
A joint venture agreement deferred the overrun thresholds to a budget to be agreed. It surfaces at the first overrun, as a negotiation the party on site wins.
An option was granted in a form the state's registry does not record. It surfaces when the owner sells to somebody else, and the option is a claim against a person who has left.
A developer's promote was calculated on a valuation day rather than on realisation. It surfaces at exit, when the realised value is lower and the promote has been paid.
Off-plan sales began before the developer held the registration the state requires. It surfaces at the escrow bank, which will not release, and at the regulator, which will not forgive.
A step-in right was drafted on a material breach with no definition. It surfaces at the delay, when the developer disputes materiality for the length of the delay.
09 · Where the work stops
The line
Your counsel signs the law. We design the structure that advice is set against, and stress-test it before the documents are drawn.
Three rows: what returns from this stage, what stays with the parties' own advisers, and who takes the decision.
The form chosen from the four, with the reason. The control matrix with each decision and its consent. The overrun, delay and step-in provisions with thresholds. The three exit formulae. The two files, listed, with the party who supplies each item and the date. The sequence from the files to a signed agreement.
The drafting of the joint venture, development and option agreements, which counsel does in the law of the parcel's state; the registry work; the developer's registration and the escrow arrangements; every valuation; every tax position; and the contractor's and lender's terms, which are theirs.
The manager, or the developer, whichever has appointed the firm, on those opinions. The other contracts with it on its own advice.
The land door runs from the access through the portfolio and the platform to this room, then to the exposure the investor holds, and five worked land structures. What follows in each is the structure as it binds, read from the instruments.
None of this is advice, and none of it invites any investment or names any land. It is our reading of a structure, and your counsel signs the law.
Read with the India family's development rooms, the structures family on security and financing, and the onshore interfaces on the sales regimes
Land · 11 minute readLandLand reaches the firm through relationships with the people who own it, in several markets. The firm designs the platform the land can enter: the portfolio, the vehicle, the developer interface and the exposure an investor holds. Six rooms, for fund managers, developers and landowners.
Land · 13 minute readWorked land structuresFive land structures worked as types: a landowner who wants units rather than cash, three cities under one platform, a developer without land, a masterplan plot with a state counterparty, and a portfolio that must exit parcel by parcel.
Land · 12 minute readThe portfolioHow several parcels become one exposure an investor can hold: the exposure statement written before the first parcel enters, one company per parcel, the chain above it, land contributed for units, the sequence, the constraints and the failure points.
What this room is attached to
- The platform above it Land · the platform
- The Indian reading of the same interface India · holding Indian land
- What the investor holds at the end Land · the exposure