What exit strategy is mutually agreed upon before project commencement?

In an industrial land Joint Venture (JV) or development partnership, a mutually agreed-upon exit strategy is critical to protect the interests of both the landowner and the developer. This strategy is typically outlined in the JV agreement or shareholders’ agreement and is tailored to the project’s nature, capital structure, risk profile, and market conditions. Below are five common exit strategies that are often agreed upon before project commencement:

1. Asset Sale Upon Completion

• Both parties agree to sell the developed asset (e.g., industrial plots, warehouses, or build-to-suit units) upon project completion.
  
• Net proceeds are shared according to the profit-sharing waterfall defined in the agreement.
  
• Preferred when:
  
  • Both parties seek full monetization.
    
  • The market is favorable for an immediate exit.
    
• Legal terms often specify a minimum sale value threshold and shared control over buyer selection.

2. Phased Sale or Lease Model

• The project is monetized in phases, allowing flexibility in revenue realization and risk mitigation.
  
• Each phase can be sold, leased, or retained based on market demand or internal targets.
  
• Profit is distributed phase-wise, enabling early returns to both parties before full completion.
  
• Suitable development horizons or large-parcel industrial estates.

3. Developer Buyout of Landowner’s Stake

• The developer may be granted an option to buy out the landowner’s share post completion or at a defined IRR benchmark.
  
• A put-call structure may be built in, allowing:
  
  • The landowner tois  “put” their share to the developer at a fixed price.
    
  • The developer is to “call” the land interest at a mutually agreed-upon formula.
    
• Useful when landowners seek passive roles and guaranteed exit options.

4. Income-Generating Hold and Share

• Both parties agree to retain the asset and share income (rent, lease, maintenance contracts) for a specified duration.
  
• May involve setting up a Special Purpose Vehicle (SPV) to manage and distribute income annually or quarterly.
  
• Works best for build-to-lease models or logistics parks with long-term tenants.
  
• Includes terms for future sale after a minimum lock-in period (e.g., 5–7 years).

5. Third-Party Strategic Sale or REIT Monetization

• Parties may agree to a bulk sale to institutional investors, REITs, or strategic buyers.
  
• The exit plan includes listing criteria, documentation, and financial thresholds to attract a large acquirer.
  
• This strategy maximizes value by aggregating fully leased or zoned industrial assets.
  
• Pre-agreed sale windows (e.g., after 80% development) guide timing and preparation.