A developer on the west coast had acquired a site and gone through the work required to have plans for residential rental building designed and the site rezoned. After investing 7 figures into getting the project ready for final construction drawings the company ran into difficulty completing a limited partnership agreement that investors would accept. After working for over 12 months on the documents and still not having received major investor buy-in the project was stuck.
Our advisory work began with reviewing the pro forma to provide some minor cost savings suggestions. The primary effort went into re-designing components of the limited partnership agreement to both increase the priority position and thus the security for the investors coming into the project and at the same time increase the opportunity for the developer to enhance their ownership stake overtime.
Some key changes included creating a split common/preferred equity capital structure with a dual type mortgage secured preferred class. These changes allowed the project to access all eligible funding channels and optimize the tax treatment for all parties.
With an initial 45 day sprint to review, make changes, and redesign all of the presentation materials, and create supplemental project videos, the project was able to subsequently obtain the common equity capital needed to engage the remaining consultants to finish the construction drawings and final pre-construction preparation.
The right approach to funding requires simple but effective deal terms for investment sources as well as a combined overall approach to managing the timing of capital advances to coincide with progressive mitigation of development risks.
To find out more about funding approaches for real estate projects enter your current email contact info on the "about REAfe" page and we will be sure to provide you with some fresh options.