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Rainmaker Marketing Corporation provides syndication services in the
form of fractional real estate sales agreements, each agreement having a
sale price that is a multiple of $25,000 (USD), because the minimum sale
price per interest is $25,000 for development-stage projects. Once
a given project is financed, developed, constructed and brought to its
stabilized operating capacity, the contract value for each fractional
interest is set by the market; as it should be.
An example of a prototypical commercial real estate development
funding cycle would be as follows:
"ABC Company, LLC
is the sponsor (and developer) of a senior housing project having a
total development budget of $10,021,500. The fractional ownership
plan will have 400 - $25,000.00 units. The minimum number of units
sold must always be $2,500,00. In the case of the example, there
will be 400 fractional units offered. Once 100 have been purchased
(thus fulfilling the remaining condition precedent to the creation of a
syndicate) the transaction closes escrow and the project is
funded. The developer must provide $21,500 in capital
contributions plus any remaining gap not covered in the capital finance
plan of the project. A gap would be said to exist if the
$2,521,500 in syndication funds subtracted from the $10,021,500 total
development budget and the construction loan origination amount.
If the construction loan is for $7,500,000, then construction financing
is indeed in place. If the construction loan would be for
$7,000,000, then the developer/sponsor must contribute an additional
$500,000 or wait until the new syndicate sells 20 more syndicate
purchase agreements. In either case, the syndicate will continue
to offer fractional interest contracts until they are either 100% sold
out or there is no longer any market demand for the developer/sponsor's
project."
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