The traditional commercial lending market has dried up, especially for construction loans. Anyone seeking a commercial construction loan will need to find a private equity fund to accomplish their funding needs. I have discovered just such a fund that is actively lending large commercial construction loans for both domestic and international projects.
The private equity fund has $1B in liquid cash and $2B in stand-by letters of credit from their investors. The fund uses a bond wrap around the note in Germany to recoup their cash and replenish the fund every 60-90 days. This private equity fund for commercial construction loans ($20M+) is very transparent, after NCND agreements are executed with their master broker. They will provide capacity and proof of funds through an attorney affidavit and will also provide title company contact information to verify closings. The bottom line is these guys have money and are funding projects.
This private equity fund will finance 100% of the construction cost (including land acquisition) as long as the appraised completed value is 80% or less of the construction loan amount. Typical rates and terms for a quality domestic construction project is 9.5% interest only, interest reserves until stabilization, 6 points paid out of loan proceeds, 3-5 year term with funding in approximately 60-90 days after Letter of Intent is issued. There are no "upfront" fees, yet the fund requires a 3rd party review fee ranging from $16,000 to $24,000 based on the size of the project after an LOI is issued and the client has received proof of funds. Also, after commitment is issued, the borrower is required to place 1% of the loan amount in a bonded and insured pre-closing escrow account which is used to satisfy closing conditions. The principal's signature is required for all disbursements and any unused balance is credited back to the borrower at closing. Other than that, this is essentially 100% financing for large commercial construction projects.
The documentation required is similar to that of conventional underwriting which includes an appraisal, environmental study, feasibility study, approved permits, corporate tax returns and personal financial statements on all borrowers. For seasoned developers with "ready to break ground" construction projects in excess of $20M, this may be a viable solution until commercial banks decide to return to this market. This construction loan process starts by completing a 2-page Intake Form and speaking with the master broker. Once their NCND agreement is signed, the principal will be in direct contact with the private equity fund and their attorney through closing.
The private equity fund has $1B in liquid cash and $2B in stand-by letters of credit from their investors. The fund uses a bond wrap around the note in Germany to recoup their cash and replenish the fund every 60-90 days. This private equity fund for commercial construction loans ($20M+) is very transparent, after NCND agreements are executed with their master broker. They will provide capacity and proof of funds through an attorney affidavit and will also provide title company contact information to verify closings. The bottom line is these guys have money and are funding projects.
This private equity fund will finance 100% of the construction cost (including land acquisition) as long as the appraised completed value is 80% or less of the construction loan amount. Typical rates and terms for a quality domestic construction project is 9.5% interest only, interest reserves until stabilization, 6 points paid out of loan proceeds, 3-5 year term with funding in approximately 60-90 days after Letter of Intent is issued. There are no "upfront" fees, yet the fund requires a 3rd party review fee ranging from $16,000 to $24,000 based on the size of the project after an LOI is issued and the client has received proof of funds. Also, after commitment is issued, the borrower is required to place 1% of the loan amount in a bonded and insured pre-closing escrow account which is used to satisfy closing conditions. The principal's signature is required for all disbursements and any unused balance is credited back to the borrower at closing. Other than that, this is essentially 100% financing for large commercial construction projects.
The documentation required is similar to that of conventional underwriting which includes an appraisal, environmental study, feasibility study, approved permits, corporate tax returns and personal financial statements on all borrowers. For seasoned developers with "ready to break ground" construction projects in excess of $20M, this may be a viable solution until commercial banks decide to return to this market. This construction loan process starts by completing a 2-page Intake Form and speaking with the master broker. Once their NCND agreement is signed, the principal will be in direct contact with the private equity fund and their attorney through closing.
No comments:
Post a Comment