Case Study: RSM facilitates successful joint venture in property development

Client overview

RSM’s client in Australia is a property developer focused on land subdivision and development. The client operates through a series of family offices throughout the Asia-Pacific region (including Singapore and Hong Kong), engaging in large land transactions in Australia. They approached RSM several years ago for assistance with the acquisition of a large parcel of land.

Background

The client sought to acquire a substantial parcel of land in Australia and required assistance with setting up a financial and tax structure to facilitate this acquisition. As a privately-owned group with significant financial resources, they aimed to develop the land by subdividing it, installing infrastructure, and selling it as home and land packages.

Our project objectives

1. Provide advice on inbound investment into Australia, including structure, tax planning, and compliance.
2. Ensure ongoing compliance functions, including audit, tax, and financial reporting throughout the project's duration.
3. Facilitate a joint venture for the property asset with a large public-listed company in Australia, leading to a project delivery agreement for the development and sale of the asset.

Our approach

RSM adopted a structured approach to achieve the project objectives:

• Establish a financial and tax structure: RSM set up a structure that involved assistance with financing arrangements, transfer pricing considerations, and navigating thin capitalisation provisions. RSM also advised the group on the cross-border implications of the transaction.
• Compliance support: RSM provided comprehensive ongoing compliance support for the client. This included handling their tax compliance obligations for the inbound investment and managing their financial reporting requirements.
• Facilitate a joint venture: RSM played a crucial role in facilitating a joint venture that significantly benefited the client's position. By assisting the structuring of a joint venture between our client and a large public-listed company in Australia, the client secured a project delivery agreement (PDA) for the development and sale of the property asset.
• Transaction advisory services: RSM provided in-depth financial analysis to support the joint venture negotiation process, helping the client understand the long-term financial implications of the deal. RSM was involved throughout the negotiation process with the joint venture party, providing strategic advice to secure favourable terms for our client.

Challenges

• Securing local debt funding: Working closely with the client to understand and address the challenges posed by fluctuating capital costs and foreign exchange restrictions, RSM provided guidance on structuring the financing arrangements, ensuring compliance with local regulations, and mitigating risks associated with foreign investment. Additionally, RSM in Australia collaborated with colleagues in Hong Kong to validate the financing structures, facilitating a smooth transition of funds from foreign jurisdictions into Australia.
• Complex compliance landscape: Australia has an extensive compliance process that involves local, state, and federal governments, which can often lead to delays in planning and development approvals. RSM’s ability to introduce the client to referral partners, such as law firms and planners, further facilitated the process. 

How success was measured

• Optimal tax position: By optimising the client’s tax position, RSM effectively helped the client to improve the financial performance of the development asset. 
• Joint venture: Facilitated by RSM, the joint venture resulted in a significant income stream and a de-risked position for the client, as well as ongoing access to the Australian market.
• Valuable development asset: By helping the client to secure a valuable development asset, RSM enabled the client to capitalise on long-term investment opportunities, generate significant income through property sales, and enhance their portfolio.

Creating a unique offering

The RSM team in Australia provided comprehensive support for complex international property development projects. Our expertise in navigating Australian regulations, structuring financial and tax arrangements, and facilitating strategic joint ventures proved invaluable to the client. 

By successfully guiding the client through the acquisition, development, and eventual joint venture of a large land parcel, we not only achieved compliance and optimised tax positions but also secured a significant long-term income stream for the client. 

RSM’s work with the client showcases the depth and breadth of our services. From initial set up to ongoing compliance and strategic advisory, RSM’s extensive experience and strategic support enabled the client to confidently and efficiently manage the compliance challenges.

This article was first published on RSM Global.