Commercial Real Estate Construction Loans

For developers and/or owner/operators seeking commercial real estate construction loans there is now a viable alternative to the commercial lender approach that destroys financial investment leverage and grossly limits the developer's (or owner/operator) ability to grow their company.  Most commercial real estate construction loans require the developer personally guarantee repayment and pledge collateral to the lender equal to as much as 350% of the loan.  You have to ask yourself, "why should I accept this, as the lender is only going to lend me my own money and charge me a fee?"

The ugly truth is that commercial real estate lenders are not in the business of accepting subjective investment risks in exchange for making a mortgage loan.  It won't happen...  It just won't happen.

There is now an alternative to the commercial lender squeeze play - the fractional real estate ownership syndication of real property interests via the tenants-in-common (or "TIC") plan approach.  The syndication approach provides the following benefits that may fundamentally change your prospects for financing the proposed project:

• Increased financial investment leverage.  The structure of the transaction provides opportunities for developers/sponsors of projects to increase their financial investment leverage while offering commercial real estate investors an opportunity to access extraordinary income-producing assets that offer near-term and long-term real estate investment opportunities.

• Increased levels of control.  The TIC Plan leaves the developer (or sponsor, as the case may be) in control of his/her future growth plans as long as the developer hits the numbers set forth in the business deal that is agreed upon prior to the syndication taking place.  This means the goal posts will not move for the lifetime of the transaction.

• Additional profit-taking may be possible depending upon the investment entitlements the proposed project may in fact qualify for at the local, state and/or federal levels.  These incentives can be "commoditized" and turned into an annuity all their own, thus allowing the developer/sponsor to to offer additional opportunities to profit from the transaction without increasing the risks to the syndication participants.

There are some issues and challenges you need to be aware of:

• Due diligence documentation is the same as it would be for a private placement offering.  Click here and download our syndication program due diligence documents checklist.

• In most cases you must have fee-simple ownership of the proposed project development site before the syndication can start.

• The market controls the sales process.  Rainmaker works with the RealEstatePlays.com syndication program to provide a 90-day initial exposure to thousands of prospective real estate investors.  This means the market controls the transaction success based upon the terms the sponsor decides to offer.  If you don't offer enough opportunity, then you will not sell out your issue and it will be a failure.  If you offer too much, then you could be working for a lot less than you have been counting upon.  Syndications are strictly controlled by the economic law of supply and demand.