Joint Ventures For Public REITs: Opportunities And Challenges

Joint venture structures continue to be an important tool for public real estate investment trusts (REITs), particularly in market environments where traditional capital-raising strategies may be challenging from a funds from operations (FFO) dilution or leverage point of view. Joint ventures (JVs) can serve as a fourth major capital source for REITs, supplementing traditional tools such as equity issuance, debt financing, and outright asset sales. When capital markets are dislocated — as they are now — properly structured JV arrangements allow REITs to raise significant amounts of cash from institutional partners while continuing to manage the asset, preserving significant upside for shareholders and maintaining market presence. This is particularly useful in an environment in which issuing equity may be dilutive and debt is costly or would result in elevated leverage ratios.