Saw someone bumped an old thread about JVs and it’s prompted me to reach out for some help/advice/thoughts about a major opportunity I have right now. All opinions welcome!
So, as many of you know, I run The Guild in Bath, UK- 3500 sq ft- established 2013- 150 members. Full with a waiting list and negotiating on a new 12k space to grow into. My obsession is automating all the boring stuff so my team can concentrate on making our members day from the moment they walk in. I have never written a line of code in my life, and I use the miracle of Zapier together with a billion cloud based tools (most notably Nexudus and Podio).
I’ve now got to the point where this place runs so well without me I don’t actually need to come here. I’m spending most of my time trying to open Guilds elsewhere, but it’s a tough call right now here in the UK, which is having a major commercial property boom alongside a crazy law which allows anyone with a commercial property to convert it to residential without needing permission- so transferring rare commercial property into red hot residential property at a time that the UK is in a major residential bubble. It’s made property deals incredibly difficult for us, and more so given that there’s now an added dimension here in Bath- developers are going crazy for student developments (we’re a two university city), and even more commercial properties/offices are going away forever.
Anyway, in the midst of all this I’ve been approached by someone who wants to do something with me . This guy is major league. I can’t say who, but you will have heard of him- he’s founder and head of a global fashion brand. He came in when we opened and stayed in touch. He’s got a property fund, and specialises in creating mixed use developments (residential, hotels, offices, leisure on one site).
So, this guy has aquired a plot of land and wants me to come up with a concept for a hub within a development they are proposing. The inference is that if we can build something together in this first plot, then we’ll be popping up whenever they develop other sites. So whereas now it’s a office, a hotel, a restaurant and a cinema, in future he’d drop in all that plus a Guild.
I know the plot and the area is ripe for a coworking space. The demand isn’t an issue, and the model I’ve built here is sound. It’s a 9000 sq ft space, with 5m height in some areas, and that’s all I’ve been given. Before we go any further, he’s asked me what I’d do with it and on what basis. I know these guys have worked on shared revenue/JV basis before, but I don’t know on what exact basis, so I’m keen to come up with a sensible proposal.
Given all that, does anyone have any similar experience, or advice on what to suggest. Assume I know all my numbers, so that’s not an issue, and profitability isn’t an issue. I don’t have any capital, or the covenant to sign a straight lease, and this guy can help with both of those, either by providing a capital contribution or guaranteeing lease finance etc. In return, I’m guessing we should create an SPV and do a profitability/equity split, right? What I’m not so sure on is how that should work- should I build in payment for myself and my tech or should I leave that out as that’ll shake out in the profit share, otherwise I’m double dipping? Should we go for rent free or would the landlord expect a rent from the SPV even though they are an equity partner?
As I say, I appreciate this is something I need to get more formal advice on, but thought I’d just throw it out there, in case anyone can help with ideas or advice, or if there’s anyone out there who could sell me some time/knowledge.