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Commercial
real estate condominium association plans are just part of the
transaction structure Rainmaker typically employs for the benefit of
commercial real estate developers and the commercial real estate
investing-public. Our structured finance approach to
commercial real estate allows us to turn a housing sales program
approach into a powerful commercial real estate financing tool.
How is
this done?
Well,
you have to understand the limitations that can effect a given
commercial real estate structured financing, to wit:
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At-Risk
Seed Capital - from the developer. These funds are used to
define the project's parameters in terms of capital financing,
development, construction and future operations. The
typical commercial real estate developer is putting up between
$250,000 to $400,000 to complete these due diligence activities
and make the proposed project ready for financing. Along
the way, the developer must also come out-of-pocket to pay the
costs associated with controlling the proposed project site.
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Entitlements
Financing. The type of project being developed dictates
which statutory investment incentives will be part of the
project. Nearly all entitlements require the project to be
placed in service prior to the entitlement vesting to the
sponsor. This means you have to complete construction and
commence operations to get the incentive (called a
"spiff"). Instead of discounting the value to
the beginning of the construction phase (where in days gone
past, institutional buyers would dramatically discount the
entitlement's value to adjust for risk), we seek to use it to
purchase an interest rate buy-down or credit enhancement for the
construction mortgage financing. This approach can be
added without creating any additional drag on the capital
funding structure because the value wasn't going to really be
seen to play a part that early in the process.
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Condominium
Investment Real Estate Plans. Here we take a portion of
the project space plan and entitle it as condominium air-rights
and sell it to the investing-public for the purposes of
generating additional at-risk equity contributions that can be
applied against the outstanding construction indebtedness.
In some cases, the funds may also be used in the last 45 to 60
days of the construction cycle. This could be as much as
10% of the total construction budget and that means the
condominium plan is worth doing on each and every project where
the benefits exceed the cost ratio.
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Fractional
Tenants-In-Common Real Estate Syndication Plans. A TIC
plan can be created for the space not otherwise encumbered by
the condominium plan and the at-risk contributions may be
applied as early as the pre-construction phase. That means
TIC plans can be part and parcel to the successful
capitalization of the project on a four-tier level approach as
follows:
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First,
the goal of the TIC plan is to cover the equity gap - the
difference between the total development cost and all other
sources of financing. The net sales proceeds are used
to provide the developer with enough equity to close escrow
on a commercial mortgage financing loan; then
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Next,
the goal of the TIC plan is to continue selling real
property interests (deeded ownership!) until there is enough
capital contributions on the table to induce a lender into
making a non-recourse commercial mortgage loan for the
project; then
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Thirdly,
the goal of the TIC plan is to provide enough capital to
obtain the non-recourse loan and allow the developer to
withdraw the developer's seed capital (making the capital
available to be used on another project immediately - a
process called "re-leveraging"); then
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Finally,
the final sales goal is to sell out the entire issue, pay
off all indebtedness and thereby insulate the investors in
the syndicate from total loss of investment due to
foreclosure or bankruptcy.
About
Rainmaker Marketing Corporation...
Rainmaker
Marketing Corporation is a consulting firm that focuses on providing
the due diligence services on a business to business (B2B) basis.
Rainmaker Marketing Corporation can trace its roots back to the late
'80's and was formally incorporated in 1994.
Over
the years, Rainmaker Marketing Corporation consultants have
completed hundreds of assignments across the United States (45
states), Mexico, Canada and the Caribbean Basin. RMC's new
construction project due diligence documentation services have led
to the successful development of income-producing properties valued
(in the aggregate) in the billions of dollars.
Take
a few minutes and learn more about RMC. This website is
designed to provide a wealth of planning information pertaining to
the capitalization, operations, and organizational program tenets
today's savvy entrepreneurial company must embrace for continued
growth and success...
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