Joint Ventures
Overview  Investor Relations Asset Management Ongoing Projects
Resources, Capabilities, Constraints
A team of knowledgeable professionals has been assembled by Katchen Company over the last 35 years. These professionals have the diversified experience and technical skill necessary to make such a project a reality. Aided by the latest technological advances, our team is poised to take on projects of any size in either the commercial or residential real estate sectors. However, Katchen Company is concerned with the quality of the projects they develop and choose to limit the scope and number of projects which are in progress at any particular time. This decision has proven to be a valuable ingredient in the company's success.
Financial
Leverage
Katchen Company has established a good working relationship with a number of lending institutions which are willing to extend construction financing. These institutions are usually interested in securing the loans with the land and require that subordination agreements be executed. This feasibility study is looking at four possible uses for the land (1) Multi Level Luxury Apartments: (2) Garden Level Apartments; (3) Mid-Rise Apartments; and (4) High-Rise Apartments. The development of an apartment community would require obtaining long term financing using a combination of land value and improvements as equity for the loan.
Liquidity
The nature of the project as determined by the feasibility study will dictate the liquidity of the venture. However, since the project is being developed as an investment property, it will have less liquidity and subject to market conditions present at the time of project completion.
Yield
Actual yields are dependent upon the final structure of the project and joint venture agreement. Katchen Company strives to maintain a profitable minimum pre-tax return on all projects that are undertaken. For the purposes of this feasibility study it has been determined that a minimum 10% per annum and a 20% overall return, over the life of the project be targeted.
Risk Investment in real estate involves a high degree of risk and isn't suitable for all investors. By investing in a joint venture with Katchen Company, you are representing that you:
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Understand the risks inherent in real estate investment
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Are financially able to withstand investment losses
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Have determined that real estate investment is suitable for you, considering your financial situation and investment objectives.
Development Strategy
The concept for developing the property will require an equity partner to contribute 15% of total development cost to the project. A portion of these funds will be used to purchase the land at a cost of $1,350,000 with the remainder being used towards overall development costs associated with the project. As the landowner of the ground, the equity partner will agree to the following:
Land Owner
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The land owner must be willing to allow the developer adequate time to put the project together. The time varies, dependent upon the complexity of the project.
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The land owner must be willing and financially capable of carrying the property and any debt that currently exists until the completion of the project.
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The land owner must be willing to secure subordination agreements on any property debt, and provide the same.
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The land owner must be willing to give partial releases as each phase is completed.
The developer will provide the necessary expertise and support to make the project as success. The value that the developer will add to the project will include, but not be limited the following:
Developer
The developer will promote the interests of the land owner by:
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Analyzing the site and creating a concept for development of the land
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Placing signage on the land to promote the project
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Designing and engineering of a site plan for the project
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Preparing promotional packets for zoning and marketing
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Initiating zoning talks with city / county
The developer will oversee / direct the following activities during development:
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Formation of LLC
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Marketing, sale, and closings on the project
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Obtaining construction financing
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Bidding and letting of construction contracts
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Money and materials management
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Distribution of funds for expenses
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Obtaining permanent financing
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Distribution of proceeds
In compensation for the contributions that each member of the LLC brings to the organization the allocation of funds will be made in two stages. The first allocation will be yearly net proceeds, which will be distributed after the closing of books and accountants reconciliation at the end of the calendar year. The second allocation will occur after the sell of the project and the repayment of all debts associated with the project.
Yearly net proceeds distribution will give the equity partner a priority distribution of year net profits up to 10% of their total capital contribution. If yearly net proceeds exceed 10% of total capital distribution, the equity partner and developer will share in the remainder of the net proceeds equally (50:50).
Upon the sell of the business and before the dissolution of the LLC, the second allocation of funds will occur. This distribution will be made after the payment of all debts associated with the project to include but not be limited to permanent financing, the equity partners original capital contribution, operating costs, real estate commissions and closing costs. After all debts have been relieved, the net sale proceeds distribution will give the equity partner a priority distribution of the net sales proceeds up to 10% of their total capital contribution. If net sales proceeds exceeds 10% of total capital distribution, the equity partner and developer will share in the remainder of the net sales proceeds equally (50:50). |
