1. Why is this product attractive?
Market-rate and workforce residential developments typically have a significant equity requirement. This financial product allows the developer to receive a quick commitment, timely settlement and a committed financial partner who understands and appreciates their business, as well as can bring significant added value to the project through financial engineering and the full menu of Enterprise products and services.
2. What is the typical project?
The project can be land development, new construction or substantial rehab. We will consider for-sale or rental communities. The funds seek to invest in projects that will have a positive impact on workforce families, placing them with quality housing, comfortably within their budget, and without requiring excessive commutes.
3. What uses are permitted?
The development project should be primarily or exclusively residential, for-sale or rental. Any commercial component should be relatively modest and if for renting, should be pre-leased or master-leased by a bankable entity.
4. When does the money come into the deal?
The workforce family of funds will invest at the time of property acquisition, or if the property is already owned, coincident with the placement of senior debt and the commencement of development. The investment term will depend on the project, with for-sale projects typically having a faster payback, but the overall life shall not exceed five years in any event. Related Enterprise programs can also purchase federal Historic or New Markets tax credits to the extent they are available in the same project.
5. What are the returns and splits?
A customized financial structure and terms will be negotiated for each individual project, dependent upon that development’s unique financial and real estate characteristics. Total return, which will usually be a combination of interest and participation for mezzanine or subordinated debt structures, will be in the high teens to low twenties range, depending on the relative risk profile. Typically, a modest development management fee will be incorporated into the project’s budget. However, after senior financing payments have been satisfied, priority will be given to repayment of and return on the workforce housing fund investment.
6. What are the developer requirements?
The developer must have sufficient net worth to support completion and any lease-up guarantees. Whle generally structured as non-recourse, the developer will be expected to provide certain environmental indemnifications and meet other selected carve-out obligations. A cash equity investment of at least 10 percent of the total equity gap is generally required. |
|
|
|
