Interests in Real Estate Ventures
The ownership of real estate and the development of real estate projects often involve two or more parties. The cooperation between different parties may be limited to one real estate project; it may encompass several projects; or it may be of a continual nature, such as a venture that invests in office properties. One of the venturers may contribute land, another may contribute financial resources to develop the land, and a third may use its land development or home-building expertise. Particularly in large projects, the benefit of spreading risk among different investors is another factor that is considered when entering into a venture.
Arrangements that involve a number of small investors who contribute capital, with one or more parties being responsible for the project development or project management, are referred to as syndications. Special accounting guidance has been developed for the syndicator's (sponsoring party's) accounting of income from syndication activities.1
Reflective of the different roles that venture partners assume to make a real estate venture successful, venture arrangements provide for different ways in which venturers participate in a venture's success. In one arrangement, a venturer may have an interest in the venture equity and share in the venture's future profits and losses; in another arrangement, the investor's interest may consist of sharing in future operating profits and losses and tax ...