Supported housing equity and joint venture capital
Introductions to equity and joint venture partners for supported housing and extra care schemes, where the gap above senior debt is larger than debt alone can close.
Bringing in a capital partner rather than more debt
Equity and joint venture capital funds the part of a scheme that debt will not reach. Where a senior lender advances 65 percent of cost and mezzanine is unavailable or uneconomic, a capital partner puts in the balance in exchange for a share of the profit rather than a rate of interest. That changes the relationship: a lender wants to be repaid, a partner wants the scheme to succeed, and they will expect a say in how it is run.
In supported housing specifically, the partners active in this space tend to be family offices, specialist property funds and high net worth investors who understand the sector's lease-based model. Some bring more than money, including provider relationships that can turn a speculative scheme into a pre-let one, which is often worth more than the capital itself. We introduce partners and structure the arrangement. We are not an investor, we do not take a position in your scheme, and we are not a lender.
Key features
- Funds the equity layer where senior debt and mezzanine will not complete the stack
- Partner takes a profit share rather than an interest rate
- Some partners bring registered provider relationships alongside capital
- Structure, control and exit terms negotiated before capital is committed
Indicative terms
- Investment size (indicative)£250k to £15m and above
- Typical partner share (indicative)25% to 50% of scheme profit
- StructureSpecial purpose vehicle, shareholders agreement, agreed exit
- Term (indicative)Aligned to the scheme, commonly 18 to 48 months
- Preferred return (indicative)Often a coupon before profit share
Indicative only. Terms vary by lender, scheme and borrower and are not an offer of finance.
Who it suits
- Developers with a site and planning but a gap well above the debt funding
- Investors expanding to a second or third scheme while the first is still stabilising
- Sponsors who want a capital partner across a pipeline rather than one deal
- Developers whose scheme is speculative and cannot support mezzanine pricing
Useful calculators
Discuss supported housing equity and joint venture capital
A view on fundability within one working day.
What a capital partner will want in return
Beyond a profit share, expect a partner to want a preferred return paid before profits are split, meaningful information rights, approval over key decisions such as the build contract and the sales or letting strategy, and a defined exit with a longstop date. Some will want a right to take over the scheme if milestones are missed.
None of that is unreasonable, but it should all be settled in the shareholders agreement before money moves. The disputes we see arise almost entirely from arrangements agreed on a handshake and documented loosely, particularly around what happens if the scheme takes longer than planned. Time is the most common source of friction.
Why provider relationships can be worth more than the cash
A partner with an existing relationship with a registered provider can change a supported housing scheme's entire financing profile. As covered on our development finance page, a scheme pre-let to a named provider attracts better leverage, better pricing and a longer facility than a speculative one.
So when comparing two offers of capital on similar commercial terms, the partner who can introduce a provider is worth materially more than the one who cannot, even at a higher profit share. We factor that into how we present and compare offers, because the cheapest capital on paper is not always the cheapest capital in outcome.
Structuring the vehicle and the exit
Most joint ventures run through a special purpose vehicle holding the site, with the developer and the partner as shareholders and a shareholders agreement governing everything else. The vehicle keeps the scheme ring-fenced from the developer's other projects, which both parties usually want, and it gives lenders a clean borrowing entity to lend to.
The exit deserves as much attention as the entry. Whether the scheme is sold on completion, refinanced and held, or forward sold to a housing association changes when and how the partner gets paid. Agreeing that at the outset, including what happens if the preferred exit is not available, prevents the scenario where the developer wants to hold and the partner wants to sell.
When a partner is the wrong answer
A capital partner permanently gives away part of the profit on a scheme, so it is worth exhausting the debt options first. Where a scheme could support mezzanine, mezzanine is usually cheaper. Where the gap exists because the land was bought too expensively, a partner is subsidising that mistake rather than solving it.
We are also candid about a specific pattern: developers who bring in a partner because their appraisal is optimistic rather than because their scheme is capital-hungry. A good partner will scrutinise the appraisal as hard as a lender will, and if it does not stand up they will decline. That is a signal worth listening to rather than working around.
Worked example: a JV on a speculative supported living scheme
A developer owns a site with consent for 16 supported living units. Total scheme cost is £3.2m including land at £700,000, with a gross development value of £4.4m. No provider is committed yet, so the scheme is speculative. These figures are illustrative only and not an offer of finance.
Because there is no pre-let, the senior lender limits loan to cost to 60 percent, £1.92m, leaving £1.28m to find against the developer's £700,000 of land value. Mezzanine on a speculative supported housing scheme is either unavailable or priced above 18 percent, so the £580,000 cash gap points to a capital partner.
A partner invests £580,000 for a 35 percent profit share with a 10 percent preferred return, and separately introduces a registered provider who agrees heads of terms on a 25-year lease over the completed scheme. That pre-let lets the developer return to the senior lender, who increases loan to cost to 68 percent, reducing the equity requirement and improving the rate.
On a £1.2m margin before finance costs, the partner's share is around £420,000, which is expensive capital by any measure. But the pre-let they introduced improved the senior terms, de-risked the exit and made the scheme financeable at all. Judged against the alternative of not building it, the trade was sound. Judged purely on cost of capital, it was not, and both readings need to be on the table before a developer signs.
Illustrative worked example only. Figures vary by lender, asset and borrower and are not an offer of finance.
Supported housing equity and joint venture capital: common questions
What is a joint venture in property development?
An arrangement where a capital partner funds the equity a developer cannot, in exchange for a share of the profit rather than interest. It usually runs through a special purpose vehicle holding the site, with a shareholders agreement governing decisions, information rights, the preferred return and the exit.
How much of the profit does a JV partner take?
Indicatively 25 to 50 percent, often with a preferred return paid before profits are split. The share reflects how much capital they provide relative to the developer's contribution, how risky the scheme is, and what else they bring, such as provider relationships or sector expertise.
Should I use mezzanine or a joint venture partner?
Where a scheme can support mezzanine, mezzanine is usually cheaper because it is a defined cost with an end date rather than a permanent share of the profit. Joint venture capital comes into its own where the gap is too large for debt, where the scheme is speculative, or where the partner brings something beyond money.
Do you invest in schemes yourselves?
No. We are a finance arranger and introducer. We introduce capital partners and help structure the arrangement, but we do not take a position in your scheme, we do not lend, and we do not sell investment property.
What should be settled before a partner puts money in?
The profit split and any preferred return, information and approval rights, what happens if milestones are missed or the scheme runs long, and the exit including a longstop date and what applies if the preferred exit is unavailable. Most disputes we see come from arrangements agreed on a handshake, particularly around delay.
Discuss supported housing equity and joint venture capital
Send us your scheme and we will come back with a view on fundability and likely terms within one working day.