Fractional Real
Estate Financing - The Flight To Quality Continues...
The advent of
fractional real estate financing for commercial real
estate development projects may exceed $10 billion this year, 
making
fractional real estate financing more than a cottage industry by any
measure. What has been missing from the market is the
necessary expertise that would allow for the syndication of commercial
real estate development projects outside of the condominium or
single-family housing speculative investment envelope.
Enter
Rainmaker
Marketing Corporation - the company that has that expertise.
For more than 15 years Rainmaker Marketing Corporation has served the
commercial real estate development and finance industries as the lead
development finance consultant charged with creating the backbone due
diligence reports and managing the due diligence third-party reporting
process. Rainmaker will provide the same level of reporting detail
review and production for the syndication program as Rainmaker's duty to
purchasers.
Rainmaker has a definitive programmatic solution that seeks to
combine painstaking due diligence together with real property based
financial investment leverage for the benefit of the developer/sponsor
and the individual investors. The outflow of this approach is to
provide a gross return of between 150% to 350%. The timing and
risks associated with a given project and given project phase of
investment drive the holding period assumptions. Pre-construction
phase investments seek a holding period not to exceed three (3) years
and a gross cash-on-cash return of 150% to 250%, while a construction
phase project real property financing would entail the same holding
period, but a slightly reduced payout formulae (on average) because the
risks have been in fact reduced. Finally, the post-construction
phase real property investment envisions a 7 to 10 year holding period
with a gross return of 250% to 350% being the expectation (making a
long-term real property investment a 25% to 35% per annum cash-on-cash
return.
The syndication marketplace is now evolving beyond the syndication of
single-family housing speculations and condominium housing speculations
to include the broadest range of business investment opportunities in
real property income-producing assets. Once the potential impact
of statutory entitlements are added to the mix you have the opportunity
to dramatically increase investor yields without necessarily having to
face a dilution of opportunity to make it work.
There are many issues that need to be clearly understood by investors
seeking to participate in these real property funding syndicates
including:
 |
An understanding of the risks of investing in a project at the
pre-construction phase. The expectation would be that, out of
10 financings, two (2) will be homeruns, four (4) will not quite do
as well as expectations suggest and four (4) will be relative flops
that present a partial loss of investment; and
|
|
An understanding of the risks of investing in a project at the
construction phase. The expectation would be that, out of 10
financings, four (4) will be homeruns, four (4) will not quite do as
well as expectations suggest and two (2) will be relative flops that
present a partial loss of investment; and
|
|
An understanding of the risks of investing in a project at
commencement of post-construction phase operating activities where
the expectation would be for 75% of investments to be met with
material success.
|
