The biggest difference is that DMA is carried out by a Project Management company who does not have a strong balance sheet.
They will borrow against the land to obtain the permits and to develop the land. They don’t have their own equity, so they are exposing the Landowner to high levels of development risk.
With a Resi Ventures LDA, we use our own equity to carry out the whole development – start to finish
This which means we can make upfront advances to the land owner and, in some cases, yearly advances until the proceeds from the development roll in.
What’s the difference between an LDA an old-fashioned JV model?
The JV and the LDA model are both very similar in that they are used to maximise the returns for the land owner. There are however couple of the major differences:
1. Firstly, Under an LDA the returns of the land owner are linked to the end lot prices, whereas under a JV the land is put in at a Valuation upfront and then there is usually a 50/50 profit split.
a. Which means under a JV, the land owner is taking more risk as the project costs may increase and reduce the overall profit
b. Whereas under an LDA since the returns are linked to the end lot prices, any fluctuation in project costs does NOT affect the land owner returns, making the LDA model a lot more favourable to the land owner.
2. Secondly, under an old-fashioned JV, the land title would have to be transferred over to the JV entity – whereas under an LDA, the land always stays in the Land Owner’s name making the LDA far more secure for the land owner.