When a club looks to embark on a development or a major property project, they often realise very quickly that they don’t have the expertise to execute it themselves. Club boards are typically made up of people who have extensive backgrounds in the local community, long ties to the club or are local business personalities; but property development – well, that is a rarity.
So, they often try to solve the problem by doing a JV with a developer as they will know the building side of things. However, this comes with its own set of risks. We turned to Anna Porter of Suburbanite Asset Advisory to get her thoughts on what works in this scenario, or if it is a disaster waiting to happen.
“Developers and Clubs are sometimes so far apart in value alignment that they cannot effectively work together” says Mrs Porter
When you think about clubs they are very purpose driven in everything they do, whereas developers are profit driven and all decisions are made with that at the forefront.
Now that is not to say that clubs don’t need to make their property assets and project profitable, however usually they don’t need to (or want to) do it at the detriment of their community facing goals. Whereas developers may not be as driven by that, so it is fundamentally a relationship that has a lot of execution risk for the club if not managed appropriately” says Anna Porter.
“It is critical to find the right developer for your club and set up very clear expectations and framework when going down this path. There are also many other JVs that can be done that may be more aligned with the Club’s goals.”
“We have been involved with helping clubs’ partner with aged care and retirement community providers, show grounds partner with local businesses in the entertainment/hospitality sectors, clubs partner with serviced apartment operators and so on. In some instances, these are better alignments for a number of reasons; firstly, that they can bring the operational experience the club usually needs beyond the build phase if they are adding in a precinct that is retirement living or serviced apartments. Then they simply go to tender and engage a quality builder for the construction phase.”
“With the right advice from the outset, finding a suitable JV partner, a quality developer or a builder can be a smooth process. It comes down to finding a good firm or advisor who has a lot of property experience to partner with, as your strategic adviser, that doesn’t have a vested interest in winning other contracts for the build/construct stage. They need to be independent of the rest of the process” finishes Anna Porter of Suburbanite Asset Advisory.
360 Degrees on the assets in a nutshell – Anna Porter, Suburbanite Asset Advisory
1. Consider the value alignment with any Joint Venture (JV)
2. Understand that developers are not as purpose driven or community driven as a club typically is
3. Acknowledge if your board doesn’t have the expertise to execute a development or project and bring in the right help and partners
4. Consider who has suitable operational expertise when selecting a JV partner