Development Funding Question

[Matthew Gaddis]

Hello, I own and operate a small development and construction company and I am looking for some advice. We are in the process of building the infrastructure for stages 3 and 4 of a 5 stage residential project. Here are the details: We owe $2.8 million to our current investor. (This includes the land cost for stages 3,4, and 5, and all of the dirt work completed for the infrastructure of stages 3, 4, and 5.) We need $3 million to finish up the infrastructure for stages 3 and 4 in order to have a total of 137 completed lots. (This includes all of the sewer, power, curb and gutter, asphalt, Etc.) The estimated value after completion is $8.905 million. (This is a fairly conservative estimation based on the value of the lots that we have already sold in the same area.) Our current investor is not in real estate development and this is caused several problems for us in terms of timeliness and delay. Feb 23.- we met talk about the funds needed to begin dirt work investor agreed to the $1 million. March 15- Have not gotten funds. Investor scheduled another meeting. March 30- We meet to go every over everything that we had said in the first meeting to confirm the funding. April 17- We are pressing for funds. April 28- We have money, but they decide to only release the first $500,000 with the promise that the second $500,000 would be released once the first disbursement was used up. June 12- First $500,000 used, release of the second disbursement requested. July 13- The second $500,000 is released. The funds are five months late from when we initially agreed to move forward and this entire time we have been paying interest on the outstanding balance of our loan. Our market is strong, we are in a good price range for the houses that we build, and our investor likes the project and has more than enough capital there fund it, but his lack of understanding of the way real estate development works, and fairly heavy handed control is going to cost us a lot more in the long run then we are comfortable with. I need advice as to where we should go for funding moving forward with the project. Ideally, we would have a total buyout of $2.8 million, with an LOC of $3 million to finish the 137 lots. We have only ever worked with private investors, but I need to know if we are better looking for another private investor or a bank that does residential development. Any advice on how to move forward and where to go from here is much appreciated! Thank you for your time. Matthew Gaddis