RAINMAKER MARKETING CORPORATION 281.537.1200

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Commercial Real Estate Syndication Plans - Continued...

Rainmaker Marketing Corporation creates both types of the most common real estate syndication plans:

Private Placement Offerings.  The change in the SEC rules means that general solicitations for private placement offerings of securities are now allowed, provided; all of the subscribers to the private placement offering are in fact sophisticated investors who are either institutional investors or accredited investors.  Due to the change in the rules, this should be the primary means of raising capital for a venture.

Condominium Sales Plans.  No, this isn't a condo plan created for the purposes of selling housing units for the purposes of providing dwellers with housing; this plan is created as a means of raising additional at-risk capital contributions.  Condo plans are subject to certain limitations and therefore should be created on the basis of limiting the scale to an amount equal to the project's capital expense for the final month of the construction phase (this can still be materially-significant to the capital funding plan).

Fractional Tenants-In-Common Sales Plans.  Tenants-In-Common syndication sales proceeds can be applied as early as the project's pre-construction phase - and that makes TIC plans very important to the developer that is seeking to maximize his/her financial investment leverage.  Unlike condominium sales programs, TIC plans provide developer's with the opportunity to reduce their capital investment in a given project to seed capital only that is subject to the developer withdrawing said seed capital based upon the success of the overall sales program of both plans being put to work in unison.

The totality of this structured fundings approach is to:

limit the developer's investment to the cost of due diligence documentation (architecture, engineering, environmental, zoning, construction costing, feasibility studies and related costs) together with the cost of obtaining site control.  This will work out to a cost of $300,000 to $500,000 per project.

increase the developer's overall business opportunity by allowing the developer to re-leverage the developer's seed capital on a more frequent basis than would otherwise be possible if the developer accepted full recourse and asset cross-collateralization requirements.

The critical considerations that must be "baked into" each syndication plan approach include:

Investment leverage.  The condominium plan is limited to the construction phase capital expenditures for the last month of the construction phase.  The corresponding percentage of the total space plan must be less than the pro-rata contributions the net sales proceeds provide (e.g.: if the condominium sales plan is intended, upon sell-out, to provide 12% of the total project development budget, the corresponding portion of the project space plan required to fulfill the sales goal must be less than 12% of the total space plan).  In some cases, this will require a significant amount of creativity and expertise to achieve (you'll want Rainmaker to create your plan to maximize this opportunity).

Equity Investor Cutoffs.  The condominium plan and the TIC plan approach lend themselves to reducing investor participation to a specific time period and a finite return that is commensurate with the risk accepted by the investors.  In particular, the TIC plan construction pool risk investors can be limited (and are routinely limited) to participating in the construction phase with a second level of TIC syndication plan sales proceeds being used to retire the construction pool risk investors without necessarily decreasing the developer's long-term incremental equity enhancement and investment income sharing.

Contact Rainmaker Marketing Corporation and get the facts.

What Goes Into An Underwriting?

The Rainmaker approach is truly a comprehensive assessment with 66 exhibits collected on every project that cover every aspect of the development, construction, operations and regulatory matters.  Collateral, credit and capacity underwriting reviews are conducted using CREFC underwriting standards in addition to a complete default risk analysis on term, maturity and technical default risk profiles.  Our typical underwriting report on a new construction project will easily exceed 500 pages and catalogue all transaction documents, plans and specifications.

Rainmaker Marketing Corporation can trace its history back all the way to 1989.  Incorporated in 1993, Rainmaker Marketing Corporation has evolved over time into a full-service business to business consulting firm.  Rainmaker Marketing Corporationís initial specialization was in issues and documentation needs corresponding to the capital funding cycle for commercial real estate development projects with a primary focus on senior housing and health care related properties.  Today, Rainmaker Marketing Corporation serves all types of commercial income-producing property development program financing requests with a combination of feasibility studies, due diligence services, structured finance consulting and a focus on commercial underwriting review services.  Rainmaker Marketing Corporationís service area includes all of the continental United States, Canada, Mexico and the Caribbean Basin.

281.537.1200

Email: consultants@rainmakermarketing.com

Commercial Real Estate Development Finance, Outsourced Underwriting Services, Due Diligence Documentation & Project Management Consulting

6706 Pebble Beach Drive, Houston, Texas 77069.

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