Hello JW, First thank you for this site and the opportunity to learn more about commercial side of real estate! I am looking to learn from those folks that have already been been participating in a JV partnership were they build the project, typically multifamily or mixed use, and hold a % of ownership at completion. Any insight here would be greatly appreciated. Todd
I thank you for your response. This funding is done through a private European conglomerate. This program is a "out of the box" program because they use a Stand By Letter of Credit to facilitate these transactions. Here is some info:
I am looking for any commercial or residential development worldwide that is 75M USD or more in which the developer is selling or needs funding on. The development has to have been started so no land.
This is where it is different...the group asks that the developer do a Stand By Letter of Credit (Will use SBLC as I go on) for 40% of the value of the property and if there is a need for funding for 2 years or more then the SBLC will be for 20%.The SBLC must come from a major bank that has assets or one that is not on an imsolvent list. If the developer goes he route of getting a private investor to do the SBLC we ask that you DO NOT pay the provider any fees UNTIL we run a background check on their company or on him/her.
If they are buying the development they still need a SBLC and they pay the developer over a 12 month period. So they are paid once a month for 1 year. Again, this is not the norm but if the developers property is not in trouble with the courts and there is no bankruptcy going on they will purchase it AS LONG as they do the SBLC.
Funding for a project has the terms of the current Libor rates +1.
They pay very well and this is different but I am living proof that they do perform b/c I have closed with them. They pay 10% of the term of the funding or the 1 year purchase so if it is negotiated at a 75M purchase then that is 7,500,000 SPLIT EVENLY among the brokers involved. My group is always 4 + there will be your group.
If you have a hotel or resort or whatever as a project they must be able to speak with the principal and for him/her to speak with the Senior people in the group they MUST show evidence of being able to do a SBLC. If there is a conference call done then I would expect you to be on there as well.
If you have any questions please email me at firstname.lastname@example.org. Thank you for reading this and hopefully we can do some work together.
A Little bit about the SBLC:
1. The SBLC is never cashed, liened, encumbered in any way.
2. It is issued by your bank (the ISSUING Bank) and is for one year. (some project are for two or three years)
3. During the year, this group advances the agreed to payments, if they miss a payment, then you advise this group that they have 20 banking days to provide the missed payment. If they do not provide the missed payment in 20 days, you advise the Issuing bank who immediately cancels the SBLC and any money received by you to-date, remains yours to keep without repayment.
4. As the issuing bank knows the date this SBLC is shown for payment at the end of the 12th month, the issuing bank also has on file a copy of the agreements stating that the SBLC will be returned unencumbered on or before that date. Remembering that it is made payable to this group or one of their entities, so they have physical possession of it during the year (unless they default).
5. On or before the date shown as payment date, which is in one year, the issuing bank should have received the SBLC back from this group, either way, the issuing bank cancels the SBLC.
6. If during the year this group or anyone tries to encumber/cash the SBLC, whoever they take it to will have their bank call the issuing bank and ask if someone can pledge the SBLC as security to get a loan, etc. The issuing bank will say 'No, I have an agreement on file that says it cannot be cashed, liened or encumbered by anyone' So therefore nobody will be able to make a loan against it.