Plante Moran REIA provides solutions to unique development financing challenges
BH Developers engaged Plante Moran REIA to explore and secure alternative lending options for a complex real estate development in Colorado.
LOCATION
Loveland, CO
SIZE
180 acres
TOTAL DEBT
$8,425,000
SERVICES
Debt financing
The challenge
A development group, BH Developers, was attempting to purchase 180 acres of raw land for the purpose of single-family home development in Loveland, Colo. The land was zoned for a lower density planned unit development (PUD) that was approved in 2014 for a previous developer.
When the original developer went bankrupt, it sold or assigned various lots within the PUD to six different groups. Unsettled claims from the bankruptcy left the PUD with the potential of several million dollars in liens to be paid to the main lender and other equity investors.
BH Developers wanted to purchase all the land that encompassed the PUD from the various groups so that it could amend the PUD with the city and increase the allowed density. However, securing financing proved difficult, as traditional lenders saw too much uncertainty, complication, and risk to finance the deal. Plante Moran Real Estate Investment Advisors (PMREIA) recommended BH Developers explore nontraditional financing sources that would be nimbler and more willing to take on the additional risk, and BH Developers engaged PMREIA to run this alternative lender search.
The solution
Given lenders saw additional risk in completing numerous transactions concurrently, obtaining financing for the acquisition of the land would require several uncommon and intricate processes. PMREIA analyzed the client’s situation and introduced the possibility of a bridge lender or a hard-money lender who would be willing to take on more risk at an increased cost. PMREIA then created a marketing package that included a projection of future development costs, future lot sales, local market information, and national home sale data in order to illustrate to lenders the merits of this development.
Through this effort, PMREIA identified and contacted approximately 30 hard-money lenders and obtained offers from six. PMREIA led discussion and negotiation between BH Developers and the prospective lenders to help the client achieve the most competitive terms. After the client chose a lender, PMREIA coordinated due diligence and negotiations throughout the closing process. Approximately $8.5 million of loan proceeds were obtained on behalf of the client.
The benefit
PMREIA’s expertise in guiding clients through the financing process helps them achieve their financial goals. We are able to conduct market analysis and leverage that to create a marketing package that includes projected development costs, connect clients with a variety of lenders, lessen the challenges faced during the closing process, and negotiate the best terms possible to maximize leverage.
If you are facing challenges with financing your real estate development projects, we can help. Contact us to learn more about our financing and capital market services.
