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Independent
Living Facility Mezzanine Loans, Fractional Real Estate Syndications & Non-Recourse
Financing
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Rainmaker
specializes in the development financing and due diligence
documentation requirements for all types of senior housing
properties and programs - including independent
living facility mezzanine loans and bridge
loans. Having said that, the days of using mezzanine loans
for independent living facility development financing are coming to
an end.
The
reasoning is simple, but you'll want all the details, so here we
go...
Mezzanine
loans are typically made on a full-recourse basis, meaning that if
the development fails, the developer will be personally responsible
for paying back the mezzanine lend. In other words, the
mezzanine lender is lending the developer the developer's own money
and making a profit from the developer's stupidity in seeking out a
mezzanine loan for this type of development program. This
approach does not increase the financial investment leverage of the
developer, because the developer is still personally responsible for
repaying the mezzanine loan (and it is likely the developer is also
personally responsible for repaying the commercial
construction mortgage financing).
Financial
investment leverage can only be increased if the developer can
acquire the construction mortgage financing loan on a non-recourse
basis and also eliminate the cross-collateralization that is
frequently attendant in these instances, otherwise; what's the point
of borrowing your own money?
Rainmaker
realized this was going to only be fixed by a consulting firm that
focused on the financial consequences of the financing and
the alternatives that may be used to dictate a different set of
outcomes or terms. Our analysis found the capital finance
structure of a given transaction is where the entire war would be
won or lost. We created a 5-point plan to help senior housing
developers (and independent living facility developers):
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Developer
Contributions. This capital is used differently than has
been the norm for the past 25 years. Today, we use it to
complete all due diligence activities (market, finance,
operations, construction, land development, engineering, design
and entitlement) and market their own equity syndication that
results from the program. The clear benefit being the
creation of the circumstances that would allow the developer to
withdraw the developer's capital and obtain non-recourse
financing. Developer contributions become developer advances.
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Entitlements
Financing. Does the project qualify for the bonus
depreciation expense allowance? What about LIHTC?
Enterprise zone credits? What about New Markets Tax
Credits? We focus on those investment incentives that are
authorized under statue and not subject to an application,
allocation and award process (too risky and takes too
long). Because these benefits do not vest until the
project is placed in service, the utility is limited to
purchasing credit enhancement for the construction loan and/or
buying down the interest rate.
Continued
on following page...
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About
Rainmaker Marketing Corporation...
Rainmaker
Marketing Corporation is a consulting firm that focuses on providing the due
diligence services on a business to business (B2B) basis. Rainmaker
Marketing Corporation can trace its roots back to the late '80's and was
formally incorporated in 1994.
Over
the years, Rainmaker Marketing Corporation consultants have completed hundreds
of assignments across the United States (45 states), Mexico, Canada and the
Caribbean Basin. RMC's new construction project due diligence
documentation services have led to the successful development of
income-producing properties valued (in the aggregate) in the billions of
dollars.
Take
a few minutes and learn more about RMC. This website is designed to
provide a wealth of planning information pertaining to the capitalization,
operations, and organizational program tenets today's savvy entrepreneurial
company must embrace for continued growth and success... |
