Although each party has 50:50 voting rights, the joint venture is 90% owned by Kier.
Kier is transfering part of its land bank and some housing developments in the east of England, valued at up to £97m, into the joint venture. Cross Keys is contributing up to £4m of equity. Transactions are expected to complete by the end of June.
Kier will receive a cash payment of up to £64m for the assets and the JV will be funded by a non-recourse revolving credit facility from HSBC Bank.
The deal will release funds to Kier for reinvestment in other parts of its business in line with its 15% return on capital employed hurdle. Kier expects the transaction to be earnings accretive in 2019.
Kier and Cross Keys have a long-standing relationship, operating in complementary sectors of the housing market. Kier will provide its development, land-buying, construction and sales expertise, while Cross Keys will provide access to key strategic relationships.
Kier chief executive Haydn Mursell said: "The joint venture represents a strategic milestone for Kier Residential. This transaction enables us to accelerate our strategy to recycle the capital employed in the Kier private land bank to drive the future growth of the group and improve our overall ROCE [return on capital employed]. In addition, the joint venture plays a role in addressing the UK government's housing strategy by creating a vehicle which can focus on delivering new homes in the east of England, a geography both parties know well."