Non-Recourse
Commercial Real Estate Construction Loans...
Applying for
commercial real estate non-recourse loans used to be a thing of the past; or at
least an activity that was limited to 
FHA/HUD-insured construction loans for
multifamily housing and healthcare facilities financings. The market
has changed though and new opportunities may be available for a variety of
project types. On the other hand, the credit crunch has left the market
for non-recourse loans (as these loans apply to commercial real estate
development projects and income-producing properties) almost completely wiped
out.
You
need a new approach...
It all comes back
to the developer's "equity financing toolbox" and a clear
understanding of how to budget a pre-construction phase project budget can be
structured to take the greatest advantage of the tools at hand, including the
developer's seed capital.
Commercial real
estate non-recourse loans (outside of the FHA/HUD envelope) get approved when
there is sufficient equity on the table to induce a lender to make the loan on a
non-recourse basis.
The developer's
job is obvious; do whatever it takes to garner enough equity to induce a
commercial real estate lender (or institutional investors in the case of a
private placement offering) to make the development and construction loan on a
non-recourse basis and without a cross-collateralization pledge being required
of the developer.
The
importance of this tasking is important only if the developer is seeking to
continually re-leverage the developer's seed capital and assemble a portfolio of
properties on an expedited basis. This cannot happen if the loan for a
single property requires a cross-pledge to all of the developer's other assets.
The seed capital discussion leads to the end-game; what are the hallmarks of a capital
funding plan that provides the opportunity the developer really needs to focus
upon?
Continued.
