Land Development Deal funding
Hello BP,
Need your help in suggesting a way to finance this deal!
My business partner and I have located 22 Acres of land in Noblesville, IN (near Indianapolis), prime for development. He is a Civil Engineer, which is nice since we have done a lot of the work in-house. We have a contract on the land, spoken with the city and received a favorable review (preliminary), and sent RFP bid packages to 4 interested contractors. We are also very close to signing a contract with a large home builder that would buy the lots from us and build in the $400-$450 range. Total cost of project is around $3M, which includes $500k for the land.
The bank we are in discussions with is interested in the deal, but there are 2 issues.
1. This is our first development deal and banks are hesitant as they are just starting to get back into this lending space. We've tried to address this issue by stressing that my civil engineer partner has worked "across the table" so to speak from developers for the past 10 years on high rises, neighborhoods, etc, even though this would technically be the first time as the actual developer. I've also met with various experienced developers to review my proposal. I've met with 2 already, and both really like the project. They went over a lot of things to watch for and voiced their approval. In the end however, both declined to consult or JV on the deal due to the small size of the project. We did also get the home builder to agree to come with us and meet with the bank, but not sure if that will help.
2. The bank will only be able to lend 65-80% of appraised value, which means we'll need to come up with a fairly large amount of equity in order to make the deal work ($500k). To address this, my thoughts are that the land is roughly $500k (scheduled to close in January), so if we could find private money for that (giving them 1st lien on the property), then the construction bank loan funds the rest. I just can't find anyone that is interested.
Does anyone have creative ways I could make this deal happen? I really feel like this is a great deal with money to be made by all, but having trouble at the moment getting the right financiers.
Thanks in advance, and happy to answer any additional questions.
Neil