Core's Income-Producing & Hotel Development Program (CHIP-9)
Here’s a quick breakdown of one of Core’s popular development programs…
(Please keep in mind that, while this email is oriented towards the hotel arena, it also applies to just about any commercial, income-producing project, such as multi-family, mixed-use (when the residential element does not exceed 25% of the project), Senior/Assisted Living, Hospital/Medical Offices, Flagged hotels with resort/retail/restaurant components, Marina Developments and others.)
Parameters & Requirements:
- Client must have a proven background in hotel development and management, and/or a contract with an established hotel operator.
- Client must have 35% equity capital invested in the project, or the ability to invest 35% into the development. (Investment partnerships supporting the hotel corporate entity are acceptable.)
- The complete Feasibility Study must be provided by HVS, PKF or by The Highland Group (www.highland-group.net). No other authorships will be accepted.
- Current MAI Appraisal must breakdown; a) "As-Is" value; b) Completed value; c) "Quick Sale" (liquidation value) as completed value based on a 180-day marketing period; d) 1st year stabilized value.
- Current STAR Report for the market.
- Current or projected occupancy must exceed 69%.
- Complete Loan Application and Executive Summary with Client Bios.
- Personal Financial Statements on all borrowers who will be on the Note.
- A 10-year Financial Projections per pro-forma spreadsheet (-form provided upon request).
Relevant Notes:
- Lender has its own, “in-house” Construction Analyst who will review the GC's line item bid sheets thoroughly.
- If the land is already owned, then a percentage of the equity in the land will be allocated towards the client's 35% contribution requirement.
- In some instances, the lender may contribute equity to the project by providing mezzanine or bridge financing. (up to 15% of project cost),
- Lender has appetite for mixed-use projects, and a special interest in marinas and dry-stacks.
As always, Core will schedule a conference call between the decision maker and the Principal to explore the project details and determine if the chemistry is real. If both parties agree that there is a mutually beneficial opportunity, and the project is deemed viable, then we will move to the next stage (subject to MAI appraisal and discovery/due diligence). The lender will issue a Term Sheet and Engagement Contract following the initial conference call and create a "Needs List" for the client.
Fees & Points:
Points: Core usually charges 1.5 to 2.5 points.
Lender Fees:
All projects are unique. The range between $15K to $40K.
Lender Points:
Lender will charge between 1.5% to 3%.
Terms:
Typically, there’s a three year const-to-mini perm allowing for the construction phase and 12-months of post completion operational stabilization.
Rate range:
LIBOR+3.5 on the debt component. Expect 18%-20% on equity or a mezz "kicker" -either as interest or as ROI on the equity.)
Funding Expectations:
The time from engagement to funding is 45-60 days. (Subject to the client being responsive and timely in providing info/docs etc.)
Important:
Once the preliminaries are reviewed and the project is determined to "fit" inside the box, Core requires an Engagement/Intake Fee of $9,800, which will be applied to the "Success Fee/Points". If we fail to fund the project, only $3,800 will be refunded to the client
