What milestones trigger developer fee payments or carried interest?

In industrial land Joint Ventures (JVs) or development partnerships, developer fee payments and carried interest distributions are tied to specific performance milestones. These milestones serve as checkpoints for risk reduction, value creation, and accountability. The structure aligns compensation with successful project execution, capital return, and compliance. Below are five common categories of milestones that typically trigger these financial entitlements:

1. Project Approval Milestones

• Trigger: Securing key regulatory and planning approvals, such as:
  
  • Change of Land Use (CLU)
    
  • Zoning clearance
    
  • Environmental permits
    
  • Master layout sanction
    
• Developer Fee/Interest: A fixed “planning success fee” or partial developer fee is often released at this stage.
  
• Purpose: Rewards early-stage risk-taking and successful navigation of approval complexity.

2. Financial Closure or Capital Raise

• Trigger: Achieving financial closure or securing project funding through:
  
  • Debt financing from banks or NBFCs
    
  • Equity investment or institutional participation
    
• Developer Fee/Interest: A structuring fee or percentage of capital raised may be paid to the developer.
  
• Purpose: Compensates for capital sourcing, investor engagement, and deal syndication.

3. Site Mobilization and Construction Launch

• Trigger: Start of physical work on site, including:
  
  • Groundbreaking or grading
    
  • Infrastructure or utility installation
    
  • Foundation laying for industrial units
    
• Developer Fee/Interest: A mobilization fee or phase-wise project management fee begins disbursal here.
  
• Purpose: Validates execution readiness and signals tangible project momentum.

4. Revenue or Occupancy Milestone

• Trigger: Achievement of defined leasing, sales, or occupancy benchmarks, such as:
  
  • 25%–50% lease execution
    
  • First unit handover or commercial operations
    
  • Revenue recognition milestones
    
• Developer Fee/Interest: Carried interest or incentive fees may begin accruing post a minimum return hurdle (e.g., 12% IRR).
  
• Purpose: Rewards income generation and market success beyond baseline returns.

5. Project Completion and Monetization

• Trigger: Finalization of project development, including:
  
  • Completion certificate or occupancy approvals
    
  • Full sale/lease of units
    
  • Exit event: refinancing, REIT listing, or bulk asset sale
    
• Developer Fee/Interest: Final carried interest (promote share) is paid based on tiered waterfall structures.
  
• Purpose: Aligns incentives with successful exit and capital return to stakeholders.