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| | Senior Housing
Hard Money Loans...
Most
developers considering senior housing hard money loans are faced with a time
consideration that, for whatever reason, the  developer believes compels them to
move forward and pay through the nose for a hard money loan in order to get
their senior housing new construction project out of the ground. Hard
money loans come with a bunch of caveats that will not - in most cases - resolve
the capital finance structure issues that caused the problem to begin with.
Here's
how it is done...
Hard
money loans are equity replacement financings; this means they are replacing the
funds you would otherwise have to put into the deal. So if you don't have
them, there are no funds to replace. Your application will be ultimately
rejected and the loan fees and time you have wasted will fly directly into the
trash. Hard money loans are not equity augmentation financing
vehicles. They are not designed for that purpose. If you need to get
extra cash in the deal, the hard money loan is not going to put it in the deal;
in point of fact, the hard money loan will actually reduce the pool of cash in
the transaction due to the front-end fees and exit fee costs associated with the
transaction.
That's
not to say these loans do not have a place. Here's a working example:
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You
are developing a senior housing project and the lending environment is
tight, but you have determined the market opportunity is real and
time-sensitive in nature. A detailed market feasibility study shows
there is in fact an opportunity to develop entry-fee independent living,
rental independent, assisted and/or rental Alzheimer's
care assisted living.
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You
have completed the required due diligence studies and have at least $300,000
in cash in the bank. You analyze the issues, challenges and contingent
opportunities and decide to develop a "market rate" entry-fee CCRC
project that includes a total of 308 living units of all types. By selecting the entry-fee approach, you open the door
to a much greater financial opportunity for the developer than could
otherwise be accessed.
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Here's
why...
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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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