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| | Bonus
Depreciation Expense Allowance?
The
bonus depreciation
expense allowance (or "BDEA") is, by any measure, perhaps the most cost-efficient
commercial real estate development finance tool to come along in a
generation. The bonus depreciation expense allowance creates the condition
precedents necessary to allow a developer of commercial real estate to access
institutional investor support for their project that does not necessarily come
with a mandatory equity dilution requirement. For the developer it is a
"have your cake and eat it, too," scenario that should not be
overlooked under any circumstances.
The advantages of this approach to providing equity capital contributions
for commercial real estate development transactions include:
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Institutional investors are not forced to underwrite the real estate or
the resulting operating business; the institutional investor is underwriting
only one key issue - will the project meet the placed-in-service deadline. |
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The business deal between the developer/sponsor can be based solely on
the capture of the bonus depreciation opportunity, thus eliminating the
prototypical equity security dilution hit the project ownership entity would
otherwise be forced to swallow. |
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The business deal may (depending upon the structure of the funding
proposal) allow the close of escrow for the transaction to occur prior to
the commencement of construction. |
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A ready market may exist for the resulting sale of securities on a
private placement offering basis to "Qualified Institutional
Buyers" ("QIBs" - as defined per Rule 144A of the Securities
Act of 1933, as amended). |
Aggressive pricing structures are a fundamental requirement of making this
institutional investment tool work for the developer, as well as an acceptable
funding structure - and that's where Rainmaker enters the picture.
Rainmaker Marketing can provide you with a structured finance funding plan that
incorporates all of the available investment incentives, as well as providing
the developer/sponsor with the necessary transactional due diligence services
required to support the program. The issues we bring forward for
consideration and disposition include:
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Structure of the construction contract - this
is critical as the elimination of construction risk exposure is a
fundamental tenet of a successful private placement offering; and |
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Creation of an allocation plan that, if
accepted by the institutional investor, limits the equity dilution
requirement because the institutional investor is looking to the BDEA for
their economic opportunity and not the future value of the business or real
estate business. |
Find out more about the value of this important tax-advantaged equity
syndication product. Contact Rainmaker Marketing and get some answers that will
actually help you make your project work.
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Do
You Know The Secret?
When it comes to commercial real
estate development finance, it doesn't matter whether you need to raise
$5 million or $50 million, the out-of-pocket costs, advance fees and
project due diligence costs will always require the same relative
investment dollars the promoters have to fund. Do you know what
that amount is? Do you know the Secret? |
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