Pre-Construction Phase Project Financing...

Obtaining pre-construction phase project financing in the institutional market is no cake-walk and we recommend consideration be given to selling real property interests (via a qualified real estate syndication plan).  In most cases, qualified institutional buyers (the "life-blood" of institutional investment funding - "QIBs") are not going to provide pre-construction phase project financing because the pre-construction phase has too many intrinsic risk elements that haven't been properly "nailed down" by the developer/sponsor group, so the exposure is (therefore) too high.  Rainmaker Marketing Corporation receives a lot of phone inquiries relating to the golden question of, "where does the equity financing come from?"  Every project sponsor and/or developer seeks to make those pre-development phase dollars go further and create the kind of financial investment leverage that is essential to the complete capital funding plan of today's commercial real estate project.  The syndication approach provides the tools to allow the developer (in certain cases) to access non-recourse construction financing by increasing the equity capital to an amount sufficient to induce the lender to make the loan on a non-recourse basis.

The answer lies in a multiple prong type of approach that requires pain-staking due diligence be completed regarding all aspects of the capital funding cycle.  One of the most intriguing methods of attracting institutional investor support is to tie the institutional investor's investment to some type of entitlement that does not require the project to be materially successful over the long-term operating window in order for the institutional investor to cash in on their investment.  Examples of this include: