Unlike
the majority of CCRC consultants
who focus on the operations and their attending regulatory envelope,
Rainmaker's CCRC consultants focus on project
development due diligence reporting and structured financing.
Indeed, Rainmaker Marketing Corporation's main goal is the completion of
the fractionalized real estate syndication to provide the gap funding
that every commercial real estate development must close in order to
compel the construction lender to close escrow and fund. Rainmaker
views capital funding as the primary activity that CCRC consultants
should be focused on because, without capital financing in hand, all the
development plans, operating plans and project pre-sales of entry-fee
interests end up going down the drain.
Whether you are a
for-profit corporation or a non-profit entity, the development of senior
housing facilities is entirely dependent upon the capital markets, or so
we have thought in the past. Having said that, we need to
understand the depth of development financing alternatives that can be
brought to bear in the unique setting of the entry-fee retirement living
facility development program.
The senior housing
industry offers the entry-fee housing developer with a unique
opportunity - the sale of fee-simple interests and entry-fee estate
interests for the same living unit. That's right, you can sell the
same living unit twice. This creates the opportunity for the
developer to divide the project into two (2) distinct development phases
and retire all the construction debt in the first phase, thus providing
the second phase construction lender with a much higher level of
collateral support (and commercial banks are never satisfied with the
collateral pool) than can otherwise be contrived.
Take a moment and
consider this impact: you develop the first phase and pay off all
debt. You develop the second phase and allow the debt to start to
pile up, while you pocket entry fees. The project is completed and
has a resulting debt/equity ratio that is much stronger. This
makes the resulting sale of the project a huge capital gain for the
savvy retirement housing developer. This means the payback period
for the developer/sponsor is moved closer to the front-end of the
development spectrum, thus dramatically increasing the developer's
internal rate of return on the developer's capital investment.
This gives the sponsor
options that, heretofore; were not possible to consider. Now add
in the commercial real
estate syndication of fractionalized real property interests and
things get really interesting. If the syndication is in fact
successful and closes at the minimum sales level (always $2,500,000)
then it will continue to be listed and offered until it is sold
out. The sell-out results in the developer being able to retire
all of the construction debt (including mezzanine
loans, bridge loans and hard
money loans, if needs be) and eliminating the investor's exposure to
bankruptcy risk and foreclosure risk.
When was the last time
you saw a higher-yielding investment that insulated the owners from
bankruptcy risk and foreclosure risk?
Time to talk to Rainmaker
Marketing Corporation.
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