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, mid 6s 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.
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.
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