• Borrower receives 51%+ of the cash flow and net residual proceeds with a significantly smaller equity component than traditional construction loans.
• Borrower retains more control over the asset than a traditional joint venture structure.
• Borrower retains all of the income tax benefits generated from the investment (consultation with Borrower’s income tax consultant is advised, however).
$25 - $50+ million; Major and Secondary Markets
80% - 85% (verifiable land equity may be considered in the cost)
Up to 75% +/-
Flexible; 3 - 7-year range works best; structured like a typical construction/permanent loan
Targeted Locations: Focus on downtown walkable and/or TOD Sites
This is a total return product for the Lender:
• Fixed-rate coupon in the 4.5%+ range (accrues during construction until breakeven)
• Lender shares in a portion of the property cash-flow and net residual (at the FMV) upon loan payoff.
• Lender requires an IRR look back to a minimum return of 7% (calculated at payoff – this is a floor return, not a capped return).
Tailored specifically to the deal.
Completion and carve-out guaranty; no repayment guaranty required.
Negotiable (typically 1%-2%).