Your SlideShare is downloading. ×
Real Estate Finance For Non Real Estate Professionals2005
Upcoming SlideShare
Loading in...5
×

Thanks for flagging this SlideShare!

Oops! An error has occurred.

×

Saving this for later?

Get the SlideShare app to save on your phone or tablet. Read anywhere, anytime - even offline.

Text the download link to your phone

Standard text messaging rates apply

Real Estate Finance For Non Real Estate Professionals2005

631
views

Published on

High level overview of how commercial real estate projects are financed.

High level overview of how commercial real estate projects are financed.

Published in: Economy & Finance

0 Comments
3 Likes
Statistics
Notes
  • Be the first to comment

No Downloads
Views
Total Views
631
On Slideshare
0
From Embeds
0
Number of Embeds
1
Actions
Shares
0
Downloads
35
Comments
0
Likes
3
Embeds 0
No embeds

Report content
Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
No notes for slide

Transcript

  • 1. Real Estate Finance 101
  • 2. Real Estate Finance 101
    • Basic Theory: Creating Value
    • Elementary Theory: Time, Quality, Money
    • Advanced Theory: Sources of Capital and “The Developer’s Creed”
  • 3. Early Construction Loan
  • 4. Early Construction Loan: Draw Meeting
  • 5. Creating Value
    • Create Value by finding a need in the market
    • Create cash flows through SALES or through RENTS
    • Create Value by Product Types:
      • Office
      • Retail
      • Residential
      • Special Purpose (Government, Religious, Single Purpose structures)
  • 6. Time, Quality, Money
    • Time the Market (who will we compete with?)
    • Sales Period (how long will be renting or selling?)
    • Time to develop the Property
    • Entitlement
    • Design
    • Construction
    • Marketing and Sales
  • 7. Quality
    • Quality
    • To meet the clients needs and market demands
        • Special tenant needs for IT, HVAC, structural, LEED, etc.
    • To satisfy generic building, life safety, energy, accessibility codes, and industry standards for quality
  • 8. Money
    • Sources:
    • Equity
    • Debt
    • Construction Period (Short Term) Funds
    • Term Period (Long Term) Funds
  • 9. Time, Quality, Money Analysis
    • Impacts of Quality and Time on Money
    • Right Product for the Market (design)
    • Inflation (Cost of construction, money)
    • Market appetite for Real Estate as alternative investment to Stock Market combined with low interest rates
    • Geo Political (Oil Crisis, Desert Storm, 9/11, Second Gulf War)
    • Acts of God (Hurricane Katrina)
    • Political (Evanston deal: 28 months for entitlement)
  • 10. Sources of Capital
    • Equity – First Money at Risk
    • Individual investors
    • Syndicates / Partnerships
    • Funds (Pensions, Endowments)
    • Institutions (Life companies, REITS)
    • Commercial Equity Sources
    • Mezzanine Lenders
  • 11. Sources of Capital
    • Debt – Next level of financial risk
    • Banks (shareholders)
    • Life Companies (policy holders)
    • Pensions funds (pensioners)
    • Commercial Credit Companies (shareholders)
    • Bonds issued by Governments, Industry, and Institutions (museums, schools) (investors)
  • 12. Developer’s Creed
    • A dollar borrowed is a dollar earned.
    • A dollar renewed is a dollar saved.
    • A dollar repaid is lost forever.
  • 13. Review Project Budget for Construction Loan
    • Sources and Uses Statement
    • Accounts for all project costs
    • Is accurate for the project and contemplated time through sell out or lease up
    • Spreading this will create a Project Cash Flow schedule (a.k.a. Pro Forma)
  • 14. Review Bank Underwriting Criteria
    • Property Types readily Financed
    • Homes
    • Apartments
    • Condos
    • Offices (with tenants)
    • Warehouses
    • Owner-occupied commercial buildings including special purpose
  • 15. Review Bank Underwriting Criteria
    • Commercial Property Types needing special underwriting:
    • Hotels
    • Nursing Homes
    • Single purpose buildings (freezers, auditoriums, religious structures)
    • Water Parks
    • Marinas
    • Country clubs
  • 16. Review Bank Underwriting Criteria
    • Internal Loan Limits
    • Concept of Loan to Value Limits (equity)
    • Debt Coverage Ratio (ability to service debt)
    • Development Risk
    • Repayment Risk / Market Risk
    • Operating Risk
    • Development Team Risk
  • 17. Review Bank Underwriting Criteria
    • Other factors banks look at:
    • Capital Markets (interest rate sensitivity, investor appetite for real estate, investor appetite for this product)
    • Developer’s motivation to do the deal
    • Project design
    • Construction Risk
  • 18. Real Estate Finance 101
    • TQM
    • Equity and Debt
    • Sources and Uses
    • What Banks and Developers must consider
    Questions?
  • 19.