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| | Private
Placement Offerings - Continued...
Continued
from page 1...
Commercial
real estate fractional ownership syndications offer a less complicated
route (in most cases) that doesn't necessarily mean an equity dilution for
the developer. The law
allows for the issuance of debt securities, equity securities or hybrids
such as loan notes that are convertible into equity securities. This
means you can use this process to fund a construction loan, a permanent
loan, a mezzanine loan, a bridge loan, common equity or preferred
equity. If you are selling real property interests (e.g.: funding a TIC
plan) then this process is not the process you should be using. The
due diligence requirements are extensive in nature. Generally
speaking, the more due diligence documentation you provide in the offering
document, the better off you will be because the offering document is
prepared for the issuer's benefit (that's you). For the typical
commercial real estate development financing, you need to provide complete
disclosures pertaining to:
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The securities being offered. |
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What
the funds will be used for once the issue is fully subscribed. |
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The
issuer's history and legal capacity to enter into the subscription
agreement. |
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The
management experience of the officers and keyman managers of the
issuer. |
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The
particulars of the proposed project's development, construction,
marketing and operating attributes, requirements and expectations. |
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The
third-party due diligence reports that have been prepared in support
of the issue. |
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The key contracts,
services agreements and related matters that bear on the issue. |
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The
rights and remedies subscribers will have once their investment is
accepted. |
The "new century"
of private placement offering investing through Internet portals is
eroding the position of Qualified Institutional Buyers as the exclusive
participants in "sweetheart deal" private placement
offerings. More and more, commercial banks, insurance companies,
venture capital funds, hedge funds and pension plans are finding that
commercial real estate development financings can provide opportunities
that, heretofore, would be unimaginable less than ten years ago.
Today's sophisticated investor is looking beyond the need for near-term
liquidity in return for having routine access to private placement
offerings that can demonstrate cash-on-cash returns above 25% per
annum. Indeed, the bar seems to be quite high for projects coming in
the 2008 pipeline, by providing for multiple equity conversion scenarios
that provided investor security (during the construction period - highest
risk period) and alternatives for both near-term window investors and
mid-term window investors.
The important issues the
sophisticated investor has to conquer include:
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Understanding the goals
of each capital funding plan that is the heart of the PPM; and |
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Understanding how the
securities are meant to function within the capital funding plan; and |
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Understanding the risks
and the plans the issuer has for managing those risks; and |
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Understanding the
organizational structure of the issuer and how it may be impacted by
the various risk elements that can be reasonably expected to impact
the business; and |
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Understanding the
rights of the security holders are being vested in the securities
issue; and |
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Focusing
on the key due diligence issues that are a must when it comes to
investing in commercial
real estate development financings. |
If
now is your time, then ask us about your participation in our client
transaction pipeline. Rainmaker covers almost the entire spectrum,
but can offer you the one-on-one or B2B support that you didn't
think you could afford. You can. Things will look different
from the inside. | |
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Do
You Know The Secret?
When it comes to commercial real
estate development finance, it doesn't matter whether you need to raise
$5 million or $50 million, the out-of-pocket costs, advance fees and
project due diligence costs will always require the same relative
investment dollars the promoters have to fund. Do you know what
that amount is? Do you know the Secret? |
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