Syndicating New Construction?

Question

Quick primer:

I was involved in the site work of a luxury riverfront townhome development here in Columbia a couple years. Phase 1 had 12 units - 6 river priced at $540,000 and 6 city view priced at $430,000, all currently sold and occupied.

Phase 2 infrastructure is in place with minimal site work needed to complete and asphalt paving.

There are currently 2 presales and 1 confirmation to purchase once activity resumes. Presales are verified, with funds in escrow. This is without any activity on the site for last 8 months.

The investor has decided he does not want to continue with Phase 2 and wants out of the project. There is significant (in my opinion) profit left in the deal and I have the opportunity to participate if I can assist in putting the funding together.

All that being said, and understanding the basics of syndication ( for apartments), is this a possibility to put this project together? Acquisition and construction are $3.5 milllion, with total sellout gross at $5.7 mil. I have no where near the wherewithal to approach a bank, nor access to individuals with this amount of capital.

Are there people / companies to approach about funding a project of this type? I've raised capital for residential flips but never anything near this amount.

This isn't intended as a solicitation, simply a how to.

Jillian Sidoti · Answer

@Christopher Goldie - I think I might have the perfect guy(s) for you. Please feel free to reach out to me and I will introduce you.

Kim Lisa Taylor · Answer

The responders on this forum have a lot of great ideas.

As for your question:

"Is there a resource to help locate people or companies that do this sort of thing?"

You could look at some of the deals posted on crowdfunding sites like RealCrowd or Crowdstreet and see if any sponsors with current deals posted there are doing similar projects and then contact them to see if they are interested in teaming on your proposed project. You could also check out the National Association of Home Builders or Building Industry Association and see if they have any members or chapters in your area.

Clifton Kaderli · Answer

Do you have control of the remaining development. If you have the lots and approved plans "shovel ready" then can you just sell them as pre-construction to-be-built? Going straight to the end consumer may solve the money problem. They already have a model to view.

Feel free to PM me the details. I have a colleague that invests in tax liens in SC and likes the area of your development.

As a point of encouragement, stay persistent. I just found the right participant for a similarly sized project in San Marcos, TX. Unicorns do walk in the forest.

Clifton Kaderli · Answer

You have the mid-size problem. This is huge by comparison to a flip, but small by comparison to a development. To find twenty million in debt is easier than five in most cases. The money source will need to do just as much due diligence.

This would be a great project for a seasoned builder that has some stroke.

Your syndication would likely be a few members of an LLC instead of a full blown structured PPM with all of the expensive documents to create it.

Christopher Goldie · Answer

Unfortunately we were not able to secure suitable financing. The gentleman selling the deal is moving forward to develop it himself and I believe it's either at the loan committee or will be after the first of the year. Someone could still buy him out but it would have to be cash and real quick.

Bo S. · Answer

Any updates?

Christopher Goldie · Answer

@Clifton Kaderli, They're townhomes so no lots to sell. Can build the overall structure, complete the exterior facade and then start finishing individual units as they sell. There are already 2 presells, out of 12, with no marketing and no construction start date. Plan is once there is at least a verbal commitment for funding we could make a hard push on marketing and get at least 6 more presells before work starts.

I'll send a PM with some info. Thanks

Jeff Greenberg · Answer

@Manolo D. Thanks for the shout out, but this is out of my wheel house.  Keep talking it up on these forums and maybe someone might be interested.

Christopher Goldie · Answer

@Manolo D. We have approached a few. Again it's the mid size problem. Why mess with a $4 mil project when there's a $40 mil to work on. The other problem is I haven't exactly figured out who all the local players for this type of project would be. I know a couple that are dedicated to land deals, others to apartments, and still others to commercial. One investor that I had on the hook equated our market to a bus stop and he was waiting for the right bus. It came and apparently was better than this deal.

Syndicating New Construction?

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