|
| | Non-Recourse
Commercial Real Estate Construction Loans - Continued...
Continued from
previous page...
The most common
method by which a lender may be induced to make a commercial construction loan
on a non-recourse basis is to increase the equity capitalization. In
previous years (and settings) this wasn't something the developer wanted to hear
because the developer's near-term economic opportunity would face dilution.
Welcome to the
21st century and the rise of structured finance fundings for commercial real
estate projects. Rainmaker Marketing Corporation provides these services for all types of
commercial real estate projects and follows a set path to fulfilling the
developer's funding requirements.
Our approach to
structuring the capital financing combines multiple programmatic initiatives:
-
Developer
capital - subject to being withdrawn from the project before the end of the
construction phase if there are sufficient equity contributions from
syndication sales and investment condominium plan sales.
-
Entitlement
financing - all types of tax credits and tax-advantaged investment products
are "annuitized" and then used for the purposes of purchasing
credit enhancement for the construction mortgage financing loan (again, the
goal being to obtain the loan on a non-recourse basis with a wave of the
"cross" provisions).
-
Condominium
plan sales - a portion of the space plan is dedicated as a condominium sales
plan syndication. This condo plan is not provided for the purposes of
providing housing to the real estate market per se, but rather to provide an
additional source of equity contributions for the project that can be used
in the last 45 to 60 days of the construction phase. In exchange for
their purchases investors in the condominium plan are typically offered a
5-year to 7-year holding period opportunity that is intended to provide a
cash-on-cash return of 25% to 35% per annum - depending upon the development
program, local market conditions and capital market conditions.
-
Fractional
tenants-in-common real estate syndications sales - the remaining portion of
the project that is not part of the condo plan goes through the
tenants-in-common entitlement program so as to allow the sale of fractional
ownership interests and use the resulting equity contributions as early as
the pre-construction phase. This makes the tenants-in-common approach
the ideal vehicle to solve equity financing requirements and allow the
developer to (at one point or another) withdraw the developer's seed capital
from the project.
-
Construction
mortgage financing loan - the final piece of the pie is to present the
lender with a significantly lower loan-to-cost ratio and negotiate for a
non-recourse loan that does not include additional cross-collateralization
requirements that would otherwise hobble the developer's ability to bring
forth new opportunities for the benefit of the investing-public, the
developer and the project employees.
| |
|
|
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? |
|
