Real Estate Development
Real Estate development projects are capital intensive ventures. And the requirement for capital is also very time sensitive in order to acquire the best properties that can produce the most return on investment. The developers typically seek professional financing sources for the projects. Many projects failed in the middle of the development or require re-capitalization due to poor due diligence, planning and insufficient financing. A well managed and controlled funding throughout the development is important to maximize investment returns.
The real estate development financing consists of debt and equity financing with capitals from various sources at different cost of capital. Typically, it is structured with capital from the developer as portion of the equity, and some debts from financial institutions or private lenders, and lastly capital from private investors.
Each participating capital has different risk, return depending on their position in the debt and equity stack which dictates the waterfall of capital and interest are paid back. These are complex deal structure that takes many negotiation and optimization to balance the risk and return.
At Crossvine, we use a holistic approach to real estate development financing. Instead of each silo of capital sources deals with developer separately and each tries to maximize its return, which is one of the reasons that causes many projects not able to acquire finance to start, fail in the middle or has less returns to some capital provider, we orchestra the entire finance for the projects. In addition, we carefully select and vet developers to ensure near-zero failure in performance. And with our expertise, experience in finance, we structure deals with different financing instruments and terms including not limited to first, second deed of trust, preferred interest, cross-collateral, shared equity upside split, various exit rights and so on to manage risks and maximize return for different types of capital. And for each types of capital, we deploy different metrics based on our risk and return assessment on the developer, the property and the overall market.