Public Land as an Equity Contribution toward a Joint Venture

A variation of the in-kind payment approach is when a municipality uses the value of its land as an equity contribution toward a joint venture with a developer. In this scenario, a public entity might enter into a partnership with private sector investors for the purpose of redeveloping a targeted urban area. The public sector “invests” the value of its land assets and the private sector partner invests cash. Among the benefits of using a negotiated disposition of municipal land and a negotiated use of land value as in-kind payment are that this approach allows a city to invest in improvements without tapping other (more costly) sources of funding. Further, this approach causes minimal negative fiscal impact; that is, it does not require a municipality to reallocate a portion of existing operating revenues.

One real-world example of this approach concerns contributing the value of land into a special purpose entity (SPE). One example of an SPE created for the purpose of redeveloping a target area is the Solidere effort in Beirut, Lebanon. Created in the mid-1990s, it was empowered to lead the planning and redevelopment of Beirut’s central business district. The implementation concept was that land owners within the target area could exchange their property for shares in Solidere, a company whose shares are now listed on the stock exchange.

Another example is detailed in box in this section, which describes the case of Puerto Madero, Argentina, where federally owned land was used as an equity contribution to the development corporation in charge of regeneration of the port area. Although this case did not involve a joint venture in its purest meaning, it did involve a public-private corporation.

Federal land as an equity contribution to Corporación Antiguo Puerto Madero Sociedad Anónima in Buenos Aires, Argentina