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| | Construction
Phase Project Financing, Lending & Investment...
The
construction phase project financing is typically the third rung in the
capitalization ladder that must be "climbed" by the project 
developer that includes the pre-development phase, pre-construction
phase, construction phase and post-construction phase project financing
proposal. Rainmaker Marketing Corporation routinely provides the due diligence consulting
services and commercial real estate advisory services that make a
construction phase project financing just a bit easier on the
stressed-out developer who can't figure out why institutional investors
aren't flocking to his/her side.
The
reality is that there are some issues that must be dealt with by the
developer that institutional investors demand as a condition precedent
to the institutional investor's participation.
What
activities are not typically financed by institutional investors or QIBs
("Qualified Institutional Buyers")?
Hereinbelow
we group them into broad categories:
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Zoning.
In almost all cases, institutional investors will automatically
reject any project funding proposal that involves a zoning fight.
Costs for obtaining zoning and permitting necessary to allow
construction to begin are viewed as critical path items.
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Environmental.
If the project proposal requires more than the filing of a complete
Environmental Phase I study, the institutional investor will require
the developer/sponsor to fund the costs associated with
environmental reviews and remediation expenses.
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Site
Control. Site control is a fundamental requirement for
institutional investor consideration. If you don't have
control of the site, you don't have control of your transaction and
institutional investors will drop the proposal without further
consideration.
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Market
Feasibility. The project must have an arm's length market
feasibility study that
substantiates the proposed project and institutional investors will
not fund these costs.
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Financial
Feasibility. The developer/sponsor group is typically required
to complete a pro
forma financial presentation regarding the project's anticipated
operating and non-operating cash flows. Obviously, it would be
very difficult for anyone to judge the merits of a transaction that
has no financial feasibility underpinnings.
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Business
Plan. The developer/sponsor must have a strategic
business plan that clearly demonstrates the efficacy of the
proposed scope of operations and the ability of the
developer/sponsor to provide management and reporting
transparency. Institutional investors will demand to see the
strategic business plan as a condition precedent.
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Talk
to a Rainmaker today and get all 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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