The Housing Chronicles Blog: June column for Builder & Developer now online

Tuesday, June 8, 2010

June column for Builder & Developer now online

My column for the June 2010 issue of Builder & Developer magazine is now online. In this issue, entitled "A Spring Thaw for Project Finance,"I interview Jonathan Lee, a Vice President with George Smith Partners (GSP), a real estate investment bank and a MetroIntelligence client on the various financing programs available today buying land, developing projects or refinancing existing ones.

In addition, MetroIntelligence is now able to work with builders and developers in need of project finance/re-finance, conduct preliminary due diligence and then bring appropriate deals to GSP. An excerpt from that column:

As the building industry continues to slowly recover from its most prolonged downturn since The Great Depression, the good news is that it appears a minor thaw may be finally beginning in the credit and equity markets. The bad news is that the rules of the game have changed so profoundly that not all players will be able to adjust accordingly...

According to GSP Vice President Jonathan Lee, who focuses largely on the residential sector, although the thaw in lending has unofficially begun, it won’t really matter until banks have re-set the land on their books to current values.
In the interim, Lee is seeing lenders reaching out to established builders as either fee builders or as JV partners to protect their investments by maintaining entitlements and building out what’s already been started.

And yet the Catch-22 here is builders don’t want to JV unless land values are re-set to current value, but lenders aren’t strong enough yet to do so.
As for buying new land, assuming a private builder can out-bid a public company, the terms for leverage are going to be strict, with hard-money interest rates and 50% loan-to-value (LTV) ratios...

Click here for entire column.

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