Hotel Project Construction Loans & Fractional Real Estate Syndication Financing

Rainmaker supports client hospitality project financings - including hotel project construction loans - using a four level tier program approach to completing the hotel structured finance solutions aimed at turning hotel project construction loans into non-recourse loans.

Our syndication program goals are simple:

1. Sell enough fractional TIC Plan syndication units to provide sufficient financing to close escrow on a development loan; then

2. If sales continue to be successful, fund enough equity contributions so as to induce a commercial lender (or a private placement offering - essentially the same thing) into providing a construction loan on a non-recourse basis; then

3. If sales continue to be successful, fund enough equity contributions so as to induce the placement of the aforementioned non-recourse hotel project construction loan and allow the developer to withdraw the developer's original seed capital; then

4. If sales continue to be successful apply all future sales proceeds to the retirement of the mortgage until it is fully retired and all other liabilities that can be retired are in fact retired.  This is a critical step because investors will be placed in the position of being able to invest in an enterprise - on a leveraged basis - that eliminates the risk of total investment loss due to foreclosure risk and/or bankruptcy risk (a very attractive attribute to have in light of the condition of the economy and capital markets).

The developer can only move the project construction loan into a non-recourse construction loan by applying a four-tiered capital funding plan approach:

1. Entitlements.  All statutory entitlements need to be brought to the table (Rainmaker undertakes the statutory review as part and parcel to the market feasibility study).  These entitlements usually require the developer to complete construction and place the asset in service.  This means the best you can hope for is to create a hybrid annuity that can be used for credit enhancement (or what amounts to the same thing for the benefit of the lender).

2. Condominium Plans.  Hotels lead the nation in condominium plans designed around an investment opportunity and not a condominium plan designed to provide housing in the local market - that won't do anything worth noting.  The condominium association plan can only provide capital contributions in the last 45 to 60 days of the construction cycle - meaning you either immediately reduce the outstanding balance of the construction loan at completion or you use the net sales proceeds in the last 45 to 60 days in lieu of the construction loan draws.  This adds up to being real money.

3. Fractional Tenants-In-Common Commercial Real Estate Ownership Syndications.  Syndications of this kind may be funded and applied to the capital funding structure of the project as early as the pre-construction phase of the project's roll-out.  This is the "sure-fire" way of raising funds and developer's who use this route can look forward to a non-recourse loan and a resulting business deal that is very appealing to them.