Why Joint Ventures are the new sweet spot in Flex

Central House and Noble House

The recent debate regarding property owners' options continues, and the JV is gaining a lot of traction. Here's why I believe the Joint Venture is the new sweet spot in Flex.

I believe the key arguments are owners' abilities to retain much-desired control/influence against their enhanced return opportunities - so I've developed this graphic to illustrate the point.

At the bottom of the scale are property owners with no flex exposure. They clearly risk being left behind.

Next, the traditional Flex option has, up to now, been the lease. As a Property Owner, the ability to control the tenant base or the quality and service levels of the product is severely constrained in this model, as are the opportunities to gain enhanced returns.

As you move up the axis, you can see the way that The Joint Venture with an established operator - who gives access to their economies of scale, brand, technology, ESG credentials, infrastructure and broker relationships - can enhance both returns and levels of control which ensures that the flex tenants are directly contracted.

You can also opt to partner with a provider but under your own "white label" brand. This gives you even more product/brand and service control.

At the top of the scale are property/fund owners such as Castleforge, who have created successful operating businesses. Although this is where the highest levels of control and ROI are, property owners should not underestimate the investment required to get a Flex brand off the ground.

My advice to property owners is to get ready for JVs / Management agreements. If you are interested in finding out more, please call me to discuss your options, as I have spent the last 23 years working on fine-tuning this model.

This is the sweet spot in the industry where we're already seeing the fastest growth.