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| | HUD Feasibility
Studies - Continued...
Continued
from previous page...
Rainmaker
Marketing Corporation's
approach is two-fold in nature:
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First,
we undertake the due diligence analysis and documentation using the
underlying assumption the construction financing will be pursuant to
a HUD-insured mortgage; then
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Second,
we undertake the due diligence analysis on a structured finance
basis so as to include the items left out of the HUD analysis and
reduce the carrying costs by dramatically shortening the
construction mortgage financing loan application period by going
into the institutional market on a private placement basis; then
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The
developer makes the decision - but now the developer is making the
decision not simply on the basis of whether or not HUD will process the
mortgage in time to capture the current market opportunity, but also on
the basis of creating the highest theoretical financial outcome for our
client - you. We serve you.
This is
possible because there are a host of capital financing tools that may in
fact be available to the developer who steps out from under the federal
government umbrella and focuses on what the market may be providing if
the right structured finance plan proposal was promoted on an equal
basis to that of the HUD program. These elements may include:
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institutional
condominium ownership plans. There are condominiums and there
are what look like condominiums but aren't condominiums in the
traditional sense. You can create a condominium ownership plan
for a fractional proportion of the project space plan and use it as
an alternative equity capital financing annuity. You tell your
investors the house will pay the taxes, insurance, maintenance and
handle all operations - giving the investor a portion of the
income generated by the condominium plan elements. These are
commonly sold to institutional investors on a private syndicate
basis. Your investment banker may even want to help. We
need to see all of the pertinent issues and challenges - making a
choice based upon a strong factual position (versus the HUD
approach).
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tenants-in-common
real estate equity syndicate plans. Unlike condominium plan
financing, TIC plan real estate syndicates can invest as early as
the project's pre-construction phase. This means the
funding may provide enough capital to qualify the project for a
non-recourse loan without having the HUD-insurance. These
plans can be a very valuable addition to the developer's
capitalization arsenal. There is a three-level set of goals
with every pre-construction phase syndicate:
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First,
provide the equity capital necessary to allow the developer to
obtain and close on some kind of construction mortgage
financing for the proposed project; then
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Secondly,
provide enough equity capital contributions to allow the
developer to obtain and close on a non-recourse construction
mortgage financing for the proposed project that is not
HUD-insured; then
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Finally,
provide enough equity capital contributions to allow the
developer to withdraw his seed capital before the end of the
construction period activities, thus giving the developer the
opportunity to re-leverage his seed capital and greatly
increasing the component capital returns over the near-term and
long-term windows.
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tax-advantaged
(statutory) annuity financing. In almost every case, statutory
tax-advantaged funding products can have an impact on the
construction phase financing (e.g.: providing capital financing in
the final 30 to 60 days of the construction phase) because the usual
requirement for conveyance of the stated benefit is the completion
of construction and commencement of operations. These benefits
may indeed be great and a careful review of all statutory programs
should be a fundamental requirement of every project market
feasibility study, but Rainmaker remains one of the very few firm's
that routinely provide this very important process.
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Do
You Know The Secret?
When it comes to commercial real
estate development finance, it doesn't matter whether you need to raise
$5 million or $50 million, the out-of-pocket costs, advance fees and
project due diligence costs will always require the same relative
investment dollars the promoters have to fund. Do you know what
that amount is? Do you know the Secret? |
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