Market Feasibility Studies - Continued...

From Page 1.

The fractional real estate syndication can be designed to provide the "gap financing" a given project is missing that would create sufficient inducement to get a lender to close and provide construction mortgage financing and provide this financing without regard to the recourse issues.  This is the first level of funding activity that needs to be considered in terms of the project's capital financing structure.  The market feasibility study is critical to this analysis, because; the nature of the syndicate financing requires a sober calculation of the potential price points and expectations of the local market area of the proposed project development site.

The second level of consideration is in terms of structuring the transaction to provide sufficient cash (at the closing table) to induce a commercial bank lender to provide the remaining funds in the form of a non-recourse construction mortgage financing loan and any other consideration must be secondary to this consideration.  The key is using the fractional syndication sales approach on sufficient scale to reduce the LTV ratio of the construction loan to a point where there would be a reasonable expectation that a pool of commercial bank institutions would compete to provide the loan on a non-recourse basis.

Look at it in context.

Senior Housing Example #1:

Total Project Budget: $12,000,000

Total Expected LTV Ratio: 75%

Total Expected Loan: $8,000,000

Total Expected Commercial Underwriters Acceptances: <5.00%

Requirements: Full Recourse & Cross-Default/Cross-Collateralization

Senior Housing Example #2:

Total Project Budget: $12,000,000

Expected Syndicate Proceeds: $6,000,000

Expected LTV Ratio: 75%

Required LTV Ratio: 50%

Total Expected Loan: $8,000,000

Actual Loan Amount: $6,000,000

Total Expected Commercial Underwriters Acceptances: >50%

Requirements: No Recourse & Waiver of Cross-Default/Collateralization

In this case, a fractional ownership commercial real estate sales syndication was undertaken for two (2) important reasons: (i) the developer ceases making capital contributions - using the syndicate's money to pay all future costs prior to closing of the construction financing; and (ii) the developer requires non-recourse financing.

Continued on Page 3.

About Rainmaker...

Rainmaker Marketing Corporation is the brainchild of Clint Lovell, a seasoned business finance consultant with more than 20 years experience.  Rainmaker is a B2B consulting firm that was incorporated in 1994 for the purposes of providing market feasibility studies to businesses seeking capital financing in the commercial and institutional markets.  Today, Rainmaker Marketing Corporation provides a comprehensive array of due diligence documentation services for most major industry groups.  Rainmaker Marketing Corporation also provides syndication management services for fractional commercial real estate syndicates that can provide mezzanine gap funding for income-producing commercial property developments as early as the pre-construction phase.  Rainmaker Marketing Corporation serves clients throughout North America and the Caribbean Basin.

Rainmaker Marketing Corporation, Inc.

15519 Dawnbrook Drive, Houston, Texas 77068

281.537.1200  

consultants@rainmakermarketing.com