Memory Care Facility Project Feasibility Studies - Continued...

The key to funding the Alzheimer's unit may lie, in no small measure, in the execution of a zero-coupon fractional ownership commercial real estate syndication sales plan.  Under this approach, the developer undertakes the syndication while the project is still in the pre-construction phase (and provided the project capital finance budget is not less than $7.5 million).  The key benefits of this approach for capital financing for Alzheimer's/dementia care programs and projects include the following:

	Recourse.  Syndicate financing is non-recourse to the developer and the development entity.  In addition, the syndicate financing does not require a cross-default pledge or cross-collateralization pledge.
	Recourse Part II.  The structure of the transaction is designed to allow the developer to access local commercial bank construction mortgage financing on a non-recourse basis and be able to negotiate away the cross-default and cross-collateralization pledges.  You no longer have to go begging with you hand out to HUD to obtain non-recourse construction financing for your project.
	Equity dilution.  Syndication financing does not require any equity dilution requirement on the development entity.  Keep your equity and maintain control of your project, your destiny and your capital finances.
	Capital Refund.  Syndication financing can be structured so that the developer can receive a refund of the developer's seed capital investment while the project before construction activities even commence.
	Timing.  Once all required due diligence activities have been completed, the syndication can be closed out in as little as 21 days and the financing can be converted by the developer and expensed as early as the pre-construction phase of the project's development schedule.

Rainmaker Marketing Corporation offers syndication consulting and the supporting due diligence consulting for market and financial feasibility studies, capital funding plans and economic impact studies.

The structured finance approach we are commending to memory care project developers (and/or owner/operators, as the case may be) uses the combination of elements in the capital funding structure to drive the following aforementioned benefits (on previous page.  To create these benefits the financial structure Rainmaker Marketing Corporation recommends to developers and owner/operators is as follows:

Entitlement Review.  Does the project qualify for any statutory benefits in the form of tax-advantaged investment incentives?  If so, these should be converted into an annuity and discounted to the value that corresponds to the pre-construction phase of the project.  This leaves the door open for converting it into cash or using it as credit enhancement, increase interest income or top-coat a loan by substituting risk pool players.

Condominium Plan.  Can a condominium association plan be created for a portion of the project space?  If the answer is yes, then the object is to create a condo plan for investment income purposes only and not necessarily a finite residence per se.  State consumer protection laws prevent the proceeds of these sales contracts from being used until what is effectively the bitter end of the construction period (last 45 to 60 days).  But having said that, the proceeds would in fact be materially significant if they can provide what amounts to additional at-risk capital financing for the last two (2) months of construction; therefore, institutional buyer condominium plans must be given due consideration.

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