If you own the site, you already raised most of the equity — the question is the conversion rate. Contribute it to a JV and it enters at basis with a promote attached. Pledge it and the lender credits basis, not value. Sell the fee into your own deal and it converts at the as-complete land value, as cash, with zero dilution.
Sponsor owns the site (basis $3M, as-complete land value $6M); project cost $20M; lender at 72% LTC wants ~$5.6M of equity.
| Contribute to the JV | Pledge to the lender | Sell the fee, lease it back | |
|---|---|---|---|
| What the land counts for | ~$3M — partners credit basis, argue the rest | ~$3M of basis credit inside the loan | ~$6M cash at the as-complete lens |
| Cash equity still needed | ~$2.6M — and the JV prices it | ~$2.6M from the sponsor | Near zero — land proceeds cover the requirement |
| Promote | Shared — the partner takes a waterfall | Yours | Yours — all of it |
| Control | Shared — major decisions co-signed | Yours, inside loan covenants | Yours — the lease is a fixed cost, not a partner |
| Cost of the capital | An equity return: 15–20%+ compounding | n/a — but the gap still needs filling | Ground rent, a fixed rate on the proceeds, deductible |
The point: a JV partner is the most expensive money in the deal and takes a promote forever; the land can be the same dollars at a fraction of the cost with nothing given up. Numbers are illustrative structure, not a quote — the real ones come from your pro forma.
Contribution enters at basis and hands a promote to the capital partner; a fee sale into your own deal converts the land at its as-complete value into cash equity with no dilution. If the goal is keeping the deal, the sale usually dominates — run both on your own pro forma.
Credit for basis, usually — not for the as-complete value, and it does not produce the cash the equity requirement demands. A fee sale produces actual dollars at the higher lens.
A fixed, deductible ground rent sized so the finished project's income covers it 3-4 times, with modest fixed escalations. Compare that to a JV partner's 15-20%+ compounding return and a share of the promote, forever.
Yes — that is the normal sequence: the fee sale funds at the construction closing, the lease and the recognition agreement are in the lender's package, and the loan sizes off the leasehold.
The land, on a 99-year lease: nothing to manage, senior to the building’s lender, low yield because the buyer is buying the right to not pay the tax. The building above it: higher yield, paid monthly, depreciable. Both are replacement property. Both close on a date we control, which is the part that matters on day 140.
1031 SolutionsWorking with an intermediary? The standby sheet for line 3 of the identification form.
Send the site, the budget, and the stabilized pro forma — the as-complete land number comes back fast, and you can put it next to the JV term sheet.