Multifamily Housing Bridge Loans, Mezzanine Loans & Alternative Financing Programs...

The historical reliance on multifamily housing bridge loans (which, in this context are actually mezzanine loans) to provide equity gap financing for a new construction multifamily project (including FHA/HUD-insured loans equity gap financing) can, in many cases, be avoided by using a tenants-in-common fractional real estate syndication sales program.  Most multifamily developers are aware of the availability of both multifamily housing bridge loans and mezzanine loans - though that market is rapidly drying up as a result of the poor performance of the single-family housing market since August of 2007, but they routinely dismiss fractional real estate syndications out of hand.

The resulting loss of financial investment leverage is mainly due to ignorance regarding commercial real estate - syndicates and association sales programs - and how these tools can be applied to the capital funding structure and power your project forward to success.

Condominium association sales plans were originally used for the purposes of selling multifamily living units to the public, but today the condominium association plan can play a different starring role based upon conventions and regulatory limitations.  Most states (quite sensibly) do not allow the developer to utilize the sales proceeds until the last 45 to 60 days to defray the construction phase end period capital expense.  That means that a condominium plan should be sized based upon what the expectations are going to be as to the capital finance costs in the last 45 to 60 days of the construction phase.  Condominium plan funds can be used for many different benefits and the structured finance consultant should not be afraid to be creative in applying these funds.

In addition to condominium association plans, the savvy developer can also use the TIC commercial real estate syndication as a means of raising capital without having to (necessarily) accept a huge equity dilution as a resulting transaction tenet.  Unlike condominium forward sales contracts, TIC plan sales contracts are not typically subject to consumer protection laws and that means you might be able to use a TIC syndication to help fund your project's capital structure instead of these hard money loans that kill earnings and place the developer at extreme risk.