Can you perceive your project being funded in this economy and have you looked at synthetic forms of funding?
The title pretty much asks the question.
Have you or can you see your project getting off the ground and if not is it because of a lack of liquidity requirements of the lender, is it the lack of reasonable terms or is it because you're too stubborn to realize that we are in a new risk underwriting economy?
Have you looked into alternative means of funding the project, other than Debt Equity or JV?
Answers (5)
What other vehicle(s) do you have in mind?
Marvin C
100% Free Biz matchmaking -> LotsOfBiz.com PanamaHotelInvestment.com MyLink500.com TopLinked.com 9K
Great question Eric.
I think that many sponsors are being stubborn and inflexible in terms of what they are looking for and how much they are willing to give to find what they are looking for.
Those that are flexible, have a track record and are willing to compensate their partners wisely are more likely to receive funding.
Of course, your question raises another, what are synthetic forms of funding?
Well if by "synthetic forms of funding" you mean synthetic leases - Sarb-Ox has all but killed those. Deals are getting done, but we are going back to the basics, no more IO and 85 bps over Treasury. Lenders are not being creative – Credit is running the show these days.
Our deals funded, but at higher costs and they take MUCH longer than they did a year ago, but they are getting done. The Life companies seem to have a decent amount of money, but they are picky and SLOW. The deals that are getting done have solid equity down (30% - 40%) and decent cash flows (1.25 or higher).
Walter C
CEO, Figueroa Capital Group and Principal, Charles Dunn Company
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Credit is king in this market, and unless the borrowers and sponsors have significant skin in the game, ie cash, they will not have fun. Borrowers are still going through the education process, and have been shocked, no matter how strong they are as a borrower, at how tight the underwriting is, and how constricted the capital (loan dollars) are right now. Having said all that, we are still seeing quite a few financing requests funded, with and without increased participating equity and JV pieces. I'm not sure what you're fishing for with the synthetic forms comment, but JV structures are somewhat more prevalent as the demand for more capital equity increases, and we'll see some forced sales caused by material default situations where the equity requirements can't be met.
It will be an interesting year or two. Have cash on hand and be patient.
I too would ask what you have in mind?
Your other answers are good, except I would revise one by saying Cash is King in a market like this.
