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Syndications are the real opportunity in a recession that can beat the odds and senior housing is the industry to do it with...

 

 

Project Financing Plans & Due Diligence...

Project financing plans are a core competency with Rainmaker Marketing Corporation.  We can develop project financing plans in as little as a week (in some cases).  Entitlement reviews at the local, county, state and/or federal levels can take a bit longer, but are usually also ordered by the client based on a quick reference look-up (a one-day review of relevant state and federal titles).  The resulting project financing plan (or "capital funding proposal" as it is sometimes called) can be literally earth-shattering.

The incorporation of multiple layers of entitlement program incentivesTIFIA, PILOT, Payment In Lieu Of Taxes together with convertible mezzanine loans, "top-coated" construction loans and limited developer capital provide for extraordinary levels of financial investment leverage.

The resulting capital funding proposal isn't limited to just "equity" and "debt".  Consideration has to be given to a wide array of financial incentives that can be applied to a given commercial real estate development financing.  The bottom line - the more thought you put into it the better off you are going to be in terms of how much money everyone will look to you to toss into the pot.  It is important to remember that the primary job of every entrepreneur is the underwriting of the resulting investment.  Plain and simple, "you need 100% of the budget funds up on the closing table to get started, so whatever percentage isn't being provided by other means, means you will be putting them up."  As the sponsor of the project financing plan your job is to underwrite the project's capital financing requirements, so all due diligence activities must be subordinated to this singular goal that accepts no substitution.

This brings us to the discussion of the key areas of the capital funding proposal that you might want to give consideration to:

Mezzanine Loans.  Straight or convertible, higher earning ratio assets allow for the strategic and judicious use of mezzanine debt.  Prime targets include healthcare, transportation, senior housing and condo hotels that can take advantage of this type of funding in a way that actually enhances the transaction.  In most cases, the mezzanine loan approach requires all of the developer's principals to accept joint and several liability (personal guarantees), a cross-default pledge and a cross-collateralization pledge.  The effective result of this approach is to eliminate the developer's ability to create and sustain a bootstrap rollout, so if you are planning a rollout, the mezzanine loan better cover a portfolio of properties to begin with or it will be years before you start assembling a portfolio.

Entitlements.  Planning grants, zero interest loans, rebated taxes, PILOT plans and TIF plans all need to be considered as these future streams of dollars can be discounted to a present value and dumped into the funding pot as cold hard cash that (in certain instances) serves as equity replacement for the developer's account.  This process must be carefully managed and due consideration given to every type of financing element including tax credit financing, tax-exempt private activity bond financing and direct federal loans and grants.  Certain types of tax credit financing require a specialized "qualified allocation plan" (New Markets Tax Credits being the most obvious)

This discussion is continued on the following page.

About Rainmaker...

Rainmaker Marketing Corporation is the brainchild of Clint Lovell, a seasoned business finance consultant with more than 20 years experience.  Rainmaker is a B2B consulting firm that was incorporated in 1994 for the purposes of providing market feasibility studies to businesses seeking capital financing in the commercial and institutional markets.  Today, Rainmaker Marketing Corporation provides a comprehensive array of due diligence documentation services for most major industry groups.  Rainmaker Marketing Corporation also provides syndication management services for fractional commercial real estate syndicates that can provide mezzanine gap funding for income-producing commercial property developments as early as the pre-construction phase.  Rainmaker Marketing Corporation serves clients throughout North America and the Caribbean Basin.

Rainmaker Marketing Corporation, Inc.

15519 Dawnbrook Drive, Houston, Texas 77068

281.537.1200  

consultants@rainmakermarketing.com

© Copyright, 2009 Rainmaker Marketing Corporation, Inc.  All rights reserved.

 

A Few Words on Change...

Clint Lovell, the Managing Principal of Rainmaker, has written a book on the subject of capitalism and the creation of a new economic society that ends our reliance on taxation and retires all of our national debt.  The book is called The Fix and you can order an advance copy now at www.the fixbookstore.com.  Order today and we'll pay your shipping, saving you some real change. 

What's New...

Read our latest whitepaper on capitalization strategies and commercial real estate syndications that provide developers with a new arsenal of capital finance weapons they can deploy in the middle of this recession.  Click here and download the whitepaper free! 

 

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