|
The senior housing
development financing market continues to evolve and eliminate
inefficiencies at all levels with the Internet providing the impetus to
drive these changes. In the late 90's, the development financing
of senior housing and retirement living projects was dominated by HUD
mortgages (through the various HUD titles for rental communities) and
commercial bank lenders who provided mortgages for entry-fee senior
housing development projects. The HUD route typically provides
approximately 80% of the total budget while the commercial bank loan
approach provides approximately 65% to 70% of the total senior housing
development budget.
The resulting gap was the
equity required to fund the transaction and the commercial bank lending
route makes the matter harder because of the cross-collateralization
requirement and recourse requirement the typical commercial bank
mortgage requires. This left very few pickings of fruit on the
development financing tree the average "mom and pop"
developer/sponsor could reach.
This created a void that
was filled using the following funding solutions:
-
HUD projects required
the developer to put up the gap. Most HUD mortgagees found
their ability to profit tied to eliminating the funding gap.
The larger mortgagees created a subordinated loan product that split
the gap into two (2) new layers - a subordinated loan that was
superior to the claims of equity security holders for 10% of the
budget and left the remaining gap for the developer/sponsor to fill
with capital contributions.
-
Commercial bank
lenders were, by and large, conceding the market to the HUD-insured
loans and focused on providing lending solutions for entry-fee
senior housing development projects. These loans carried
comparatively low LTV ratios and left all but the most well-healed
developers out of the market. Commercial banks strangled the
developer and this opened the way for mezzanine
loans and bridge loans,
but the hard money lenders were the only market participants to
focus on the emerging opportunity. The result was the influx
of hard money loans into senior housing transactions along with all
their machinations for good and not so good.
The 21st Century dawned
with a new way of funding the opportunity - commercial
real estate syndications of fractional ownership interests in real
property. In today's ultra-competitive world economy, the
syndication approach provides benefits that create opportunity at all
levels while eliminating cost inefficiencies that place a drag on
productivity. The net result is a new market platform being
provided by Rainmaker Marketing Corporation that provides the following
benefits:
-
Increased financial
investment leverage for the developer and/or sponsor; and
-
Increased equity
funding levels that readily lend themselves to a structured finance
solution that inculcates risk management into the capital funding
plan; and
-
Provides the
developer with the ability to move beyond single-project
developments and increase the asset qualities and quantities that
can be sold off into the market.
Time to learn more?
Call Rainmaker Marketing Corporation today and take advantage of our
free initial consultation to get all of your retirement living
development issues answered.
|
