Commercial Real Estate Construction Lenders

In today's market, commercial real estate construction lenders are setting a whole new level of hurdles the commercial real estate developer must broach in order to qualify the project and entice the commercial real estate construction lender to issue a bankable financing commitment or close the loan.

As with everything else in a market economy, when the costs of acquiring a commodity become too high (and construction financing is a commodity and an investment product) then alternative funding programs and policies can be implemented to meet the demands of the market.

Rainmaker's approach is to utilize the realestateplays.com syndication platform to provide the alternative financing terms the market so desperately needs today.  In point of fact, the realestateplays.com syndication approach may be used to replace the mortgage financing of the proposed project altogether with an equity product designed to:

• Reduce the amount of debt capital (loans) that would otherwise be required to fully capitalize a development-stage commercial income-producing property.

• Increase the financial investment leverage the developer (or sponsor, as the case may be) would potentially enjoy by reducing the long-term capital financing (the permanent mortgage) required.

• Fill gaps in the pre-construction phase capital funding plan and/or construction phase capital funding plan.

There are other specific terms and conditions that are set forth in the real property purchase agreement between the developer/seller and the syndicator/buyer.  All syndications are subject to the following general conditions:

1. Minimum Syndication: must be at least $2,500,000.

2. Unit Size: each real property fractional ownership interest in an initial syndication shall be $25,000.00.  This means the initial syndication will be for not less than 100 units.

3. Net Proceeds: each $25,000 unit provides $23,000 in net syndication proceeds (excluding units held by the syndication platform).

4. Initial Syndications: syndications may be undertaken at the pre-construction phase, construction phase or post-construction phase and each initial syndication shall be a modified Dutch Auction of units to be offered over an initial 90-day market window.  If the syndication sells at least 100 units, then the developer/sponsor/seller must close on the financing.

5. Follow-On Syndications: each initial syndication (at the pre-construction or construction level) that is in fact successful will create a post-construction phase syndication that serves as the take-out for the initial syndication.  The syndication will continue until the number of units sold equals the total development cost of the project (rounded - actual partial amounts must be paid by the developer).

6. Units Held by Syndication Platform: the syndication platform (Real Estate Plays Dot Com, LLC) will receive from the developer/sponsor (or "Seller") seven (7) fractional ownership interest units upon successfully syndicating the first 100 units of the syndication.  Moving forward, the syndication platform will receive 7% ownership of all units.

7. Developer Cash-Outs: developers/sponsors cannot cash out until the fully-developed property is brought online.  

8. Follow-On Syndication Schedules: all follow-on syndications continue until the syndication is completely sold out or the auction listing continues for any 90 day period without any units being acquired by investors.

There are additional rules and issues that must be considered by the developer before a final decision on the funding objectives of the project have been made.  These issues include legal/organizational matters, opinions of counsel, distributions plan amendment, type of entities allowed and operational and development matters and contracts.