$2Mm Raise on front of $28Mm Deal

Tampa, Florida
General Real Estate Investing
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$2Mm Raise on front of $28Mm Deal

Greg Keiht
Investor · Cincinnati, OH · Member since 2016 · 3 posts · 1 vote

Hello to all and thanks in advance for any input / feedback.

The opportunity exists to develop 6 high end single family units . The entire development team is in place and engaged (Attorneys, architects, surveyors, engineers, builder, contractors, material suppliers, etc. etc.), and multiple letters of interest and soft commitments to fund the construction at permit. (Cleared environmental Phase I, New survey, and are at site plan stage and requesting a letter of commitment to permit from the governing body now). In this jurisdiction the horizontals are permitted with the building permit and there's no site plan review for projects of less than 10 units (though we do have a site plan).

The road is in, plat recorded, zoning done, utilities on site (but obviously will still need ran to the individual lots).

Financing at permits is fine, and it's nice to know it's there if needed. But like I've been telling them - we can pre- sell units with permits and don't even need their financing at that point as we just negotiate the draw schedule with the buyers lender or the buyer directly.

Property has a conservative - as is existing market value of around $3.5Mm - but probably closer to $5Mm in reality with new divided lots recorded, and is owned free and clear (30+ years). Approximately $1.2Mm invested to get it to this stage, with a conservative
quantifiable - projected development profit margin of 20% + .

The problem is there's a partner (the only one) on this deal who's experiencing his own personal liquidity problems which are unrelated to this project. He needs an infusion of capital to resolve those issues and is willing to give up his equity to do so.

Due to a myriad of factors IT WILL NOT FIT INTO TYPICAL UNDERWRITING CHECK BOXES. So I knew it would be hard money and / or an equity partner. Unfortunately most "Hard Money" sources aren't actually that - they're just table funding notes that fit into other check boxes to sell into the market.

So I'm tapping this knowledge base (Thank You) for any ideas, referrals, thoughts, or whatever you're willing to share.

Respectfully,

GK

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  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    2y
    Quote from @Greg Keiht:

    Hello to all and thanks in advance for any input / feedback.

    The opportunity exists to develop 6 high end single family units . The entire development team is in place and engaged (Attorneys, architects, surveyors, engineers, builder, contractors, material suppliers, etc. etc.), and multiple letters of interest and soft commitments to fund the construction at permit. (Cleared environmental Phase I, New survey, and are at site plan stage and requesting a letter of commitment to permit from the governing body now). In this jurisdiction the horizontals are permitted with the building permit and there's no site plan review for projects of less than 10 units (though we do have a site plan).

    The road is in, plat recorded, zoning done, utilities on site (but obviously will still need ran to the individual lots).

    Financing at permits is fine, and it's nice to know it's there if needed. But like I've been telling them - we can pre- sell units with permits and don't even need their financing at that point as we just negotiate the draw schedule with the buyers lender or the buyer directly.

    Property has a conservative - as is existing market value of around $3.5Mm - but probably closer to $5Mm in reality with new divided lots recorded, and is owned free and clear (30+ years). Approximately $1.2Mm invested to get it to this stage, with a conservative
    quantifiable - projected development profit margin of 20% + .

    The problem is there's a partner (the only one) on this deal who's experiencing his own personal liquidity problems which are unrelated to this project. He needs an infusion of capital to resolve those issues and is willing to give up his equity to do so.

    Due to a myriad of factors IT WILL NOT FIT INTO TYPICAL UNDERWRITING CHECK BOXES. So I knew it would be hard money and / or an equity partner. Unfortunately most "Hard Money" sources aren't actually that - they're just table funding notes that fit into other check boxes to sell into the market.

    So I'm tapping this knowledge base (Thank You) for any ideas, referrals, thoughts, or whatever you're willing to share.

    Respectfully,

    GK


     So it sounds like you need a new equity partner. I would look toward some private lenders and funds (we may have interest if its worthwhile investment).

    I would also reach out to other builders and developers in the area and see if you can co-develop the property with them. 

    When it comes to bringing someone on board, make sure you have:

    1. A detailed plan and schedule. 

    2. Your budgets very tight as well as a waterfall analysis for equity distributions. 

    3. You will probably want to make sure you have a recent appraisal on the property as well.

    4. Current BPO on the future homes value. 

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  • Greg Keiht
    OP
    Investor · Cincinnati, OH · Member since 2016 · 3 posts · 1 vote
    2y
    Hi Chris. Thanks for the response.
    1. Executive Summary, site plans / surveys are done and SOV (schedule of Values) awaiting final blue print approval.
    2. We've been running way overly aggressive construction costs numbers + another 15% and it still just makes sense (partly because of the ppsf the locale historically fetches on this key and the limited supply). Equity distributions haven't been ran because we haven't taken in any outside partners (yet). My compensation is on the back though (lol as is always the case).
    3. We've held back on appraisal just because any lender will run their own.
    4. We had Southebys Run a BPO, it came in around $4.26Mm for 1st 5 and $6.25Mm for 6th (different lot / view, larger unit, etc).

    I'll reach out today for an initial chat.

    Best and Thanks again.
    GK
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  • Dave Van HornPro Member
    Fund Manager · Wayne, PA · Member since 2009 · 1k+ posts · 1k+ votes
    2y

    I agree with Chris but perhaps that new equity partner could be a GC or someone who is already a party to the deal that has a vested interest in doing the work on the deal.

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