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| | Commercial Real
Estate Syndication Plans - Continued...
Rainmaker
Marketing Corporation creates both types of the most common real estate syndication plans:
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Condominium
Sales Plans. No, this isn't a condo plan created for the
purposes of selling housing units for the purposes of providing
dwellers with housing; this plan is created as a means of raising
additional at-risk capital contributions. Condo plans are
subject to certain limitations and therefore should be created on
the basis of limiting the scale to an amount equal to the project's
capital expense for the final month of the construction phase (this
can still be materially-significant to the capital funding plan). |
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Fractional
Tenants-In-Common Sales Plans. Tenants-In-Common syndication
sales proceeds can be applied as early as the project's
pre-construction phase - and that makes TIC plans very important to
the developer that is seeking to maximize his/her financial
investment leverage. Unlike condominium sales programs, TIC
plans provide developer's with the opportunity to reduce their
capital investment in a given project to seed capital only that is
subject to the developer withdrawing said seed capital based upon
the success of the overall sales program of both plans being put to
work in unison. |
The
totality of this structured fundings approach is to:
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limit
the developer's investment to the cost of due diligence
documentation (architecture, engineering, environmental, zoning,
construction costing, feasibility studies and related costs)
together with the cost of obtaining site control. This will
work out to a cost of $300,000 to $500,000 per project. |
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increase
the developer's overall business opportunity by allowing the
developer to re-leverage the developer's seed capital on a more
frequent basis than would otherwise be possible if the developer
accepted full recourse and asset cross-collateralization
requirements. |
The
critical considerations that must be "baked into" each
syndication plan approach include:
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Investment
leverage. The condominium plan is limited to the construction
phase capital expenditures for the last month of the construction
phase. The corresponding percentage of the total space plan
must be less than the pro-rata contributions the net sales proceeds
provide (e.g.: if the condominium sales plan is intended, upon
sell-out, to provide 12% of the total project development budget,
the corresponding portion of the project space plan required to
fulfill the sales goal must be less than 12% of the total space
plan). In some cases, this will require a significant amount
of creativity and expertise to achieve (you'll want Rainmaker to
create your plan to maximize this opportunity). |
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Equity
Investor Cutoffs. The condominium plan and the TIC plan
approach lend themselves to reducing investor participation to a
specific time period and a finite return that is commensurate with
the risk accepted by the investors. In particular, the TIC
plan construction pool risk investors can be limited (and are
routinely limited) to participating in the construction phase with a
second level of TIC syndication plan sales proceeds being used to
retire the construction pool risk investors without necessarily
decreasing the developer's long-term incremental equity enhancement
and investment income sharing. |
Contact Rainmaker
Marketing Corporation and get the facts.
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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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