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Developers
seeking strip mall financing for new
construction projects are now facing capital market conditions that can only be
described as deteriorating. If you are seeking a non-recourse construction
loan for your neighborhood strip mall shopping venue, then you will need to
attract a credit anchor and be able to provide additional equity contributions
to induce a lender to make the construction and development loan on a
non-recourse basis. Rainmaker Marketing Corporation is the consulting firm
to turn to for structured funding solutions that serve the developer seeking
non-recourse financing (including strip mall financing) by:
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Increasing
the equity contributions; and
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Eliminating
the larger measure of construction risk the lender would otherwise be
expected to bear; and
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Providing
a means of continually reducing the specter of a total loss of investment
due to foreclosure or bankruptcy by using tiered equity syndications; and
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Using
the due diligence documentation process as a means for validating all
aspects of the proposed project's key milestone goals so as to eliminate -
wherever and whenever possible - issues and challenges that may (under other
circumstances) serve to create delays and/or budget overruns.
Rainmaker
Marketing Corporation has provided commercial real estate developers with
consulting solutions for over twenty years that focus on the due diligence
documentation process as a means to creating an end-game of a non-recourse
construction loan that does not also include a cross-collateral pledge of the
developer's other assets. The reasoning here is that developers are really
promoters of commercial real estate investment opportunities for the
investing-public, so the more project opportunities the developer can
effectively, efficiently and responsibly provide, the more likely the developer
will be able to grow at the developer's highest sustainable rate and the
resulting output will be multiple projects (including strip mall financings) for
the investing-public to review and make an investment decision upon.
But
you are worried about moral hazards...
Moral
hazards - and the potential for creating them in commercial real estate
development projects - can be (cet. par.)
managed by requiring the developer to remain within a due diligence
documentation envelope that has been designed by Rainmaker Marketing Corporation
to eliminate the opportunities for moral hazards to enter into mix. This
means the budgets for the construction program, the marketing program and the
operating program have to be carefully calculated because the penalty for a
shortfall falls on the developer (all additional capital requirements being
first satisfied out of the development management fee income and other cash
flows the developer would be otherwise scheduled to receive) before there is a
call for voluntary additional capital contributions to the other equity security
holders.
But
you are worried about construction cost overruns...
Rainmaker
recommends that all new commercial real estate development companies utilize the
design/build construction contracting approach because:
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It
eliminates second dollar change order cost exposure of the developer and the
other stakeholders in the project; and
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It
fixes the price of construction to be the responsibility for the contractor
to meet (cet. par.) and all cost overruns not specifically approved
by the owner (or developer in this case) will be the financial
responsibility of the contractor save Acts of God, war, weather delays and
related matters; and
-
It
allows for more efficient budgeting and for some documentation cost savings
to be realized in the critical pre-construction phase of the project's
development stream.
Continued
on following page.
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