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Real Estate Syndications - Multifamily Housing Development & Acquisition
Financing...
The recent history of the
multifamily housing
finance market has shown us that most
apartment real estate syndications were so low-yielding that the developer (more
often than not) was unable  to effectively syndicate the proposed
financing. The reality of the multifamily housing development finance
marketplace today is the requirement to provide multiple levels of opportunity
for the construction risk pool investors for any given apartment real
estate syndication (or other multifamily housing syndications such as
independent retirement living, assisted living and condos) because developers
can no longer rely upon the FHA/HUD-insured loan approach because of the
extended application times that quite often result in the developer missing the
development opportunity window. New apartment construction continues in
most major markets throughout the country.
All of these
conditions are favorable to the new construction apartment developer. The
key is getting the project financed in a credit environment that continues to
contract, squeezing marginal projects and developers out. Rainmaker's apartment real estate syndication solution is to:
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create a
limited term construction syndicate that has a projected lifespan of no more
than three (3) years. This syndicate will constitute the construction
risk pool and the minimum cash-on-cash return will be around 50% per annum
(that's right, 50% per annum).
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create a
syndication that is designed to be the long-term take-out financing for the
construction risk pool. This pool will see a halving of their
opportunity compared to the construction risk pool, but an extended holding
window in the range of 7 to 10 years; the goal being to provide a gross
return of no less than 250% for a 10-year holding period (for an average of
25% cash-on-cash return per annum).
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Once these two (2)
syndication approaches have been put in place, the syndication sales will
continue until sufficient sales proceeds are generated to provide a
higher level of equity financing so as to enable the developer to access the
required construction mortgage financing loan on a non-recourse basis and
without a cross-pledge of the developer's other remaining assets.
Continued
on page 2...
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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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