Memory Care
Facility Project Feasibility Studies - Continued...
Continued from
previous page...
Rainmaker
Marketing Corporation's
approach to the financial feasibility issues has to include structured finance
services because, in the majority of cases, the developer has sufficient capital
to complete the due diligence documentation burden and support any syndication
and/or real estate pre-construction marketing program, but not have sufficient
funds to induce a lender to close escrow on a construction mortgage financing
loan. Developer's consistently misjudge this critical component and push
projects forward that cannot meet the necessary tests. Therefore; the next
level is to understand the key test issues being related in terms of the
structured finance approach that Rainmaker commends to every developer client.
First, all concept
phase projects are divided into two (2) groups: those projects that have
sufficient capital to complete the due diligence documentation and syndication
marketing requirements and those that do not have sufficient capital to complete
the due diligence documentation and syndication marketing regimen. Those
that don't are eliminated from consideration.
Now the project is
ready to head into the structured finance body shop and pick up some speed.
The
structured finance approach we are commending to memory care project developers
(and/or owner/operators, as the case may be) uses the combination of elements in
the capital funding structure to drive the following aforementioned benefits (on
previous page. To create these benefits the financial structure Rainmaker
Marketing Corporation recommends to developers and owner/operators is as follows:
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Entitlement
Review. Does the project qualify for any statutory benefits in the
form of tax-advantaged investment incentives? If so, these should be
converted into an annuity and discounted to the value that corresponds to
the pre-construction phase of the project. This leaves the door open
for converting it into cash or using it as credit enhancement, increase
interest income or top-coat a loan by substituting risk pool players. |
|
Condominium
Plan. Can a condominium association plan be created for a portion of
the project space? If the answer is yes, then the object is to create
a condo plan for investment income purposes only and not necessarily a
finite residence per se. State consumer protection laws prevent the
proceeds of these sales contracts from being used until what is effectively
the bitter end of the construction period (last 45 to 60 days). But
having said that, the proceeds would in fact be materially significant if
they can provide what amounts to additional at-risk capital financing for
the last two (2) months of construction; therefore, institutional buyer
condominium plans must be given due consideration. |
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Fractional
Real Estate Syndications. The final leg is the creation of a
tenants-in-common ownership structure for the portion of the project that is
not part of the condominium ownership association plan. The resulting
structure is offered to the investing-public on a fractional syndication
basis (each fractional unit being equal to $25,000 in all cases). The
proceeds from a fractional syndication can be applied at the
pre-construction phase of the project's development program; that makes
fractional syndications a "must have" for each and every
commercial real estate development financing. |
