Joint Venture Organizational Chart (Real Estate Transaction)

Summary

This chart depicts a commonly used structure for a real estate joint venture. In this structure, a capital member (who is usually providing a majority of the equity capital) and an operating member (who is typically an expert in the specific type of real estate asset or operation) form a new limited liability company (LLC) and enter into the operating agreement setting forth their rights and obligations. Often, the joint venture will form a wholly-owned subsidiary company which then owns the property. This structure is typically used when the parties anticipate obtaining third-party financing since lenders often require a bankruptcy-remote special-purpose LLC to hold title to the property. Since the subsidiary company holds title to the property, the management agreement governing the day-to-day operation of the property is usually entered into at the subsidiary level.