Capital Spotlight – Highlighting featured capital investors. We regularly publish the detailed criteria of our most unique real estate capital sources.
85% LTC Non-Recourse Debt for Horizontal Residential Land Development
The investor is backed by a large life insurance company who has pledged $2B towards the platform specializing in funding residential land developers. While there is a high interest rate, this factor may easily be offset by the high leverage provided on a non-recourse basis, and fully accruing payments (deferral of payments until maturity of the loan.) This loan program provides a strong opportunity for land developers to scale their pipeline without being burdened by a heavy equity raise.
| Capital Type | Senior Debt for Residential Land Subdivisions |
| Geography | Select markets throughout United States; Strong preference for growing “Smile States”; Also interested in CO, ID, MN, OH, OR, PA, UT, VA, WA, and WI markets. The key geographic criteria for a market is stable employment and jobs growth. |
| Property Types | Subdivided land zoned for home building; Single family detached or townhomes |
| Uses of Funds | Land acquisition, horizontal hard & soft construction costs |
| Sponsorship | Development sponsor should have a project track record. Suitable financials among the owners that may demonstrate an approximate net worth of 60% of the loan amount, and liquidity equal to 30% of hard costs. |
| Recourse | Non-recourse except for a guarantee of completion, and standard “bad boy” carveouts for fraud and misrepresentation |
| Check Size | $2,000,000 – $100,000,000 (largest deal to-date is around $80MM) Typical deal size is $8MM-$15MM |
| Loan to Value | Up to 85% LTC (loan-to-cost) |
| Sponsorship Equity Contribution | May use P&S deposit funds from a homebuilder-buyer as part of the required equity contribution |
| Targeted Return | 14-15% fully accruing over the term |
| Lender Fees | 1% origination fee |
| Payment Structure | Fully accrued rate – no payments until maturity Interest may be paid current if the borrower does not want interest to accrue |
| Duration | 1-3 years |
| Prepayment Structure | 12 months minimum interest |
| Underwriting Requirements | If borrower is not planning, or not capable, to build the homes themselves, all lots must be under contract (pre-sold) to sell to a buyer (either affiliated to the sponsor, or a third party) |
| Deposits | Legal and third-party reports |
| Closing Time Frame | 30 – 60 Days |
If this capital source may be of interest, book a call to discuss a potential capital arrangement.
Read our last Capital Spotlight: Participating Preferred Equity for Existing Assets