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
|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