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Do you have all the necessary
due diligence reports for the phase of capital financing you are seeking to
perfect? What happens if the mini side is the limit of sales you can
realistically make over an orderly syndication marketing period? This
page answers some of the structured finance questions all developers and/or
owner/operators of senior housing development projects face.
The Rules of the Road are:
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Pre-Construction Phase
capital financing of a given senior housing project must be tied to
specific investment incentives to maximize the odds of success.
The Pre-Construction Phase investment faces too man unknowns to warrant
capital investment by any party other than the developer.
Investment incentives (tax cuts and tax breaks, grants, loan guarantees,
etc.) provide an alternative means of raising capital while not facing a
diminution of the total opportunity. To make the Pre-Construction
Phase capital investment a reality, the Construction Phase capital
funding must be "on the table" - meaning the financing
commitments are there including the financing that will serve as the
Pre-Construction Phase take-out.
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Construction Phase
capital financing for senior housing development projects can also be
tied to investment incentives to maximize success. Bear in mind
that if you go the real estate syndication route, you cannot use the
FHA/HUD Loan Insurance programs for your construction and permanent
financing. As with the Pre-Construction Phase capital financing,
the Construction Phase capital financing must include the takeout for
the Construction Phase (most construction loans provide a permanent loan
or mini-perm loan feature that will suffice) so the Construction Phase
capital investors can see how they can exit the transaction.
This brings us to our first
supposition:
Capital
funding requires the senior housing development sponsor to undertake the
entirety of the capital financing program in reverse...
Everyone wants to know the
order of funding and the order of retirement. Lenders want to see who
is taking them out, the conditions of the takeout and how their (the
lender's) interests are being safeguarded. The commercial real estate
syndicate finance approach provides the opportunity to reduce the risk
exposure by any and/or all of the following:
All of these measures
effectively provide the means by which the risk exposure of the lender can
be enhanced to the lender's advantage. This allows the lender to issue
the all-important loan commitment that is the key to moving the project
beyond the beginning of the Pre-Construction Phase.
Take the time to find out
more about what can be done to make your project a financial windfall
opportunity. Contact Rainmaker Marketing Corporation today and take
advantage of a free initial consultation.
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