Real Estate Investment Companies - Continued...

Rainmaker Marketing Corporation provides syndication services in the form of fractional real estate sales agreements, each agreement having a sale price that is a multiple of $25,000 (USD), because the minimum sale price per interest is $25,000 for development-stage projects.  Once a given project is financed, developed, constructed and brought to its stabilized operating capacity, the contract value for each fractional interest is set by the market; as it should be.

An example of a prototypical commercial real estate development funding cycle would be as follows:

"ABC Company, LLC is the sponsor (and developer) of a senior housing project having a total development budget of $10,021,500.  The fractional ownership plan will have 400 - $25,000.00 units.  The minimum number of units sold must always be $2,500,00.  In the case of the example, there will be 400 fractional units offered.  Once 100 have been purchased (thus fulfilling the remaining condition precedent to the creation of a syndicate) the transaction closes escrow and the project is funded.  The developer must provide $21,500 in capital contributions plus any remaining gap not covered in the capital finance plan of the project.  A gap would be said to exist if the $2,521,500 in syndication funds subtracted from the $10,021,500 total development budget and the construction loan origination amount.  If the construction loan is for $7,500,000, then construction financing is indeed in place.  If the construction loan would be for $7,000,000, then the developer/sponsor must contribute an additional $500,000 or wait until the new syndicate sells 20 more syndicate purchase agreements.  In either case, the syndicate will continue to offer fractional interest contracts until they are either 100% sold out or there is no longer any market demand for the developer/sponsor's project."