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| | Construction
Loans - Commercial Real Estate Development Financing...
Commercial real estate construction loans
can be acquired quite readily as there are multiple markets for the
origination and funding for most construction loans. The key
players in the construction loan industry are:
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 Commercial banks. Commercial
banks
dominate the commercial real estate mortgage lending market by virtue of
their depth of market coverage, but they are at the bottom of the
pile because they don't provide equity financing. Banks routinely provide the
lowest loan-to-value ratio in the market, but seek to offset this
tremendous liability by providing a very competitive interest rate
(the "riskless lending rate"). In addition, the commercial bank will require a very
high (comparatively speaking) amount of collateral for the loan
(150% to 350%). This reduces the development program to
whatever the bank decides it is going to be because the bank
controls your assets, controls your cash flow and controls your
future growth potential through a modern form of indentured
servitude.
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Institutional private
placements. Private placements make up a very large chunk of
the construction financing market. Lending is not typically
done on a personal recourse basis and the collateral is typically
limited to the project assets and accounts. Institutional
placements can take untold months to complete and you have to carry
the project (finance & carrying costs) for the entire period.
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Hedge funds, REITs and venture
capital firms. These firms are specialists within a given area of
construction financing and their terms are typically pricier than
the institutional private placement route or the commercial bank
route. In most cases personal recourse is required as
condition precedent to underwriting the loan request.
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Government supported loans.
These include direct lending programs offered at the local, state
and/or federal level with the federal government being the single
biggest player pursuant to statutory acts. There are multiple
titles that need to be considered and the processing time can (in
some cases) be way too long to give them serious consideration
unless they are treated as the lender of last resort (a position the
federal government routinely assumes to support an industry or
geographical area).
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Get
the facts. Talk to a Rainmaker today...
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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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