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Non-recourse
loans for the retail development industry have fallen victim to the
tightening credit markets, leaving developers to look for shopping
center construction financing in other quarters and/or face the specter
of having to place more equity capital at-risk in order to obtain any
kind of construction financing for their projects. This is where
Rainmaker Marketing Corporation can (once again) demonstrate our
added-value consulting services approach.
Before
one gives over to panic, a careful analysis of the entirety of the
development stream (as it applies to commercial retail shopping centers)
and how equity is created in a shopping center development program will
demonstrate a structured funding approach that, under certain
circumstances, allow shopping center developers to reduce the impact of
equity security dilution on their financing and reduce the amount of
risk capital the shopping center developer will have in the deal.
So,
what is all the fuss about? The entirety of the game plan revolves
around the incremental equity gain that a development creates.
Some people refer to this gain as the "sum of the parts are less
valuable than the whole," and they would be wrong. Commercial
shopping centers are income-producing real property assets. Their
value is based upon an analysis of the likely value of the future cash
flows the asset is expected to generate. These are discounted to a
present value (today's dollars) and it is the difference between the
present value and the cost of development that is in fact the
incremental equity gain. The developer worries that additional
equity financing will lead to a diminution of the developer's own
economic opportunity beyond the development stage equity gain.
Before the developer jets off to the next lender, it might pay to
understand the incremental equity gain created by developing and
stabilizing the asset will go (the lion's share at the least) to the
construction risk pool investors whether the developer likes it or
not. Once we understand the fact the developer must take a
long-term position in the deal, it gets a lot easier to put together a
plan that benefits the developer on a level that - up until now - wasn't
thought to be possible.
It
all depends on how the construction financing is structured (hence the
term, "structured funding"). Rainmaker Marketing
Corporation suggests you give consideration to our five-point funding
plan approach.
Continued
on the following page...
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