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Now
shopping center developers and the investing-public have the opportunity
to come together to create shopping
center syndicates to participate in the higher-yielding near-term
construction risk pool or participate in the post-construction risk pool
for long-term investment income holding opportunities that commercial
income-producing properties routinely generate. The key to making
shopping center syndicates work for both the developer and the
investing-public is to understand the timing issues, how gains are
created and how to match expectations with actions.
Rainmaker
takes the guesswork out the mix by having created a program based upon
Rainmaker's expertise and experience in the capital markets for clients
seeking to develop one kind of an income-producing property or another.
The
first issue to understand is the construction financing issue - as this
issue pertains to the developer acquiring a construction loan. The
key underwriting issue (in most cases) is a limitation of three (3)
years for the developer to build out the asset and lease-up the property
to its highest sustainable ongoing operating capacity; properties
requiring more than three (3) years will not be underwritten for a loan
by most commercial lenders.
First
Syndicate Prerequisite - Term of Syndicate
All
construction phase financing shopping center syndicates are to be
designed so as to not last longer than three (3) years. In this
period of time, the developer is expected to develop and construct the
project, commence operations and market the property so as to reach the
property's maximum sustainable operating capacity.
Projects
that are already developed and being operated at peak efficiencies can
be financed by syndicates having much longer terms, but new development
projects have to be limited to a proposed three (3) year term. If
everything goes according to plan, the construction pool investors will
receive their share of the profits and gains all within a three (3) year
period. This does not obviate the fact that some projects will
struggle in their lease-up or construction activities and thus will end
up requiring more than three (3) years to reach their maximum operating
capacity, but these occurrences are considered to be exceptions to the
general rule.
The
next issue relates to the overall gains that are estimated to be
generated by the different types of syndications that are available -
meaning condominium
investment plan syndications (not condominium housing) and fractional
tenants-in-common real estate plan syndications. These two (2)
types of real property syndications create separate investment holding
opportunities and separate sources of at-risk equity capitalization for
the developer's project.
Continued
on the following page...
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