When a client invests in a project, they receive shares in a controlling entity responsible for the purchase and development of the land: a Special Purpose Vehicle. The special purpose vehicle (also known as an SPV) is a registered proprietary limited company which is incorporated for the purpose of the property developments completion. The SPV functions as a legal entity which collectively represents all investors in a project. Investors also have voting rights in this Company, which for example can be exercised should the management agreement require major changes.
The Joint Venture agreement to undertake a project is between Lion Property Group and the Proprietary Limited Company.
The development site for the project is purchased by the Company which represents the investors, using investor capital. As the investors are shareholders, they are entitled to the assets of the Company to recoup their investment in the unlikely event of an insolvency or other failure. This means that investor capital is secured against the value of the development site itself. If the worst-case happens, investors can sell the site to get their capital back, or take another course of action, depending on what the shareholders vote to do.
While the land is collectively owned by the investors, they don’t want to be doing the work of actually undertaking the development. Which is why the Company appoints Lion Property Group as the Development Manager via the management agreement. This agreement also outlines the plan and overall intended process for the development, including the type and number of properties to be constructed.
As the Development Manager, Lion Property Group is responsible for completing the development on behalf of the Company and the investors. This involves, but is not limited to:
- overseeing all administrative tasks required to complete the project;
- appointing and collaborating with town planners, architects, land surveyors, and engineers to complete development plans;
- submitting the plans to Council and obtaining all relevant approvals as required by the jurisdiction of the development site;
- representing the investors at civil tribunals relating to the project, if required;
- obtaining financing from a lender to fund construction;
- selling the developed properties in-house, or appointing a realtor to assist with sales.
This investment structure is utilised because it ensures that investors are protected, but grants us the ability to undertake the development in a timely and efficient manner in line with investor expectations.