In no other industry is the adage “cash is king” more relevant than in real estate development and acquisitions. Far too many times, real estate entrepreneurs will come across exciting and profitable opportunities only to be shut out because their equity is tied up in other projects. If they could free up this capital, they would be able to pounce on additional deals and, more often than not, increase the return their illiquid position is currently generating.
With access to a new bucket of capital for this financing platform, GenX Lending is now looking to finance positions like these, ranging from $500,000 to over $15 million.
“We see it all the time, sponsors coming to us for financing and asking us to push the leverage because their cash is tied up in other projects,” said GenX Managing Partner, Mark McClure. “And refinancing these projects isn’t an option because either their LP interest is non-controlling or refinancing just doesn’t make sense economically. Their equity is essentially trapped in an asset, albeit a cash flowing asset, and thus illiquid.”
With a new source of capital and subordinated structure designed for this issue, real estate investors can quickly free up capital by borrowing against this equity. They then hedge the rate they pay to GenX Lending by pledging the return received from this trapped equity.
“Borrowers can essentially cover their debt payment while reinvesting in other projects,” said McClure.
Here’s a hypothetical example: A developer has the opportunity to acquire a 20-acre parcel for a subdivision, but they are lack-ing the $500,000 in cash equity needed to close on the land in under 30 days. The developer has a 25% interest in a 350-unit apartment complex that has a valuation of $50 million and $20 million in equity, giving the developer a $5 million stake (25% of $20 million.) However, refinancing would be too expensive and, again, time is ticking to get the offer in.
GenX Lending will underwrite the asset using their own valuation model, no time-consuming appraisal needed. They will work with the borrower to ensure that the loan will be in full compliance with the first mortgage position and partnership documents. They can help close on the $500,000 just a few weeks from issuance of term sheet, helping the developer tap their trapped equity and put it to use.
GenX Lending operates mostly along the Eastern Seaboard, with additional projects in Texas and the Midwest. However, McClure said that, “if the deal makes sense we will go anywhere in the continental United States.”
“We’ll look at almost any income-producing scenario, but we pay close attention to office, retail, industrial, warehouse, self-storage and multifamily projects,” he explained. “And we look at hotels on a case-by-case basis.”
While this is another great product for The GenX Capital Companies, which includes GenX Capital Partners and GenX Lending, their bread-and-butter continues to be bridge loans for opportunistic commercial real estate projects, ranging from $250,000 to over $75 million in the five core classes of assets and LP/GP equity investments in residential acquisitions and developments.
To get your project financed or for more information call 305-507-6777, go to GenX-Lending.com or email Loans@GenX-Lending.com
Comments are not available on this story.
Send questions/comments to the editors.
