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Commercial real
estate investing made simple.
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Mezzanine Loans,
Bridge Loans, Due Diligence Documentation & Development Finance Consulting
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So, what purpose do mezzanine loans and bridge loans serve in the financing
of commercial real estate development projects?
A good question and one that the Rainmaker consultants field quite
frequently. Basically, a mezzanine loan is used as near-term (three (3)
years or less) funding measure for developers seeking to create additional
financial investment leverage by using the mezzanine to replace the capital
contributions the developer would otherwise make to the transaction. Let's
be very clear on this point - mezzanine loans replace the capital you have in
your hands and not capital that you do not have in your hands. If you are
seeking to acquire additional equity investment then you have the following
choices to consider:
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Shelve the project until you have enough
funds to cover all contribution requirements your project may have regarding
at-risk equity and capital contributions; or
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Undertake a private
placement offering of equity securities to raise the funds necessary and
thereby accept a potentially massive dilution of your ownership interests in
the project; or
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Undertake a private placement offering of
equity securities that are based upon some investment incentive entitlement
the project may qualify for at the local, state and/or federal level.
The third choice is the most common one the developer usually seeks to
implement. The entitlements review should have been undertaken in the
course of the market
feasibility study's completion. If this is not the case, then consider
having Rainmaker complete the investment incentive entitlements review without
delay. It costs far less than a mezzanine loan application fee and can
offer you the opportunity to utilize these incentives to provide your project
with the equity financing (gap financing) you really need. Rainmaker
offers a comprehensive capital
funding plan approach that will help you maximize your opportunity for
funding success.
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Contact a Rainmaker consultant today and get real answers to your
pre-construction phase project financing and construction phase project
financing needs.
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