Describe two ways for a developer to raise equity (initial capital) for a development project. Explain the...

50.1K

Verified Solution

Question

Finance

Describe two ways for a developer to raise equity (initialcapital) for a development project.
Explain the significance of community residents, localpoliticians, and approving bodies (i.e. Dept of City Planning,community boards, etc.) in the regulatory process
Describe two types of liens, and how each can disrupt adevelopment project. What are some measures a developer or generalcontractor can take to prevent these?
State and describe at least three types of financialinstitutions that developers typically source loans from.
Mezzanine debt is established as an intermediate fundingmechanism that usually supplements the equity investment and firstmortgage. Any traditional lender may use it in negotiations.Typically, deals with mezzanine debt are structured with a 70percent mortgage, 5 to 25 percent mezzanine debt, and the remainderfrom the developer’s equity. Unlike a mortgage, a partnershipinterest is assigned in case the developer defaults on the loan,making mezzanine a convertible debt-equity instrument. Why mightmezzanine debt entice a lender?
Describe the function of a construction loan vs. a permanentloan (take-out).
Explain the importance of release provisions on purchase moneynotes (PMNs) when trying to obtain development financing fromlenders for land development.
When contracts are bid on price per unit, why might asubcontractor deliberately bid high on the item for which thequantity was underestimated? In this case, how is a subcontractorlikely to bid on the other (accurately estimated) items?
How does a developer assess the accessibility of a prospectivedevelopment site?

Answer & Explanation Solved by verified expert

3.9 Ratings (711 Votes)

Ways for Developer to raise equity initial capital for development project Generally in a realestate development project 6080 of the total capital is funded by banks and other financial institutions as a Loan on which they charge interest ie Debt Now the remaining 2040 of the total capital is raised by the developer himself as a part of capital ie Equity So generally developers raise See Answer

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member

Transcribed Image Text

Describe two ways for a developer to raise equity (initialcapital) for a development project.Explain the significance of community residents, localpoliticians, and approving bodies (i.e. Dept of City Planning,community boards, etc.) in the regulatory processDescribe two types of liens, and how each can disrupt adevelopment project. What are some measures a developer or generalcontractor can take to prevent these?State and describe at least three types of financialinstitutions that developers typically source loans from.Mezzanine debt is established as an intermediate fundingmechanism that usually supplements the equity investment and firstmortgage. Any traditional lender may use it in negotiations.Typically, deals with mezzanine debt are structured with a 70percent mortgage, 5 to 25 percent mezzanine debt, and the remainderfrom the developer’s equity. Unlike a mortgage, a partnershipinterest is assigned in case the developer defaults on the loan,making mezzanine a convertible debt-equity instrument. Why mightmezzanine debt entice a lender?Describe the function of a construction loan vs. a permanentloan (take-out).Explain the importance of release provisions on purchase moneynotes (PMNs) when trying to obtain development financing fromlenders for land development.When contracts are bid on price per unit, why might asubcontractor deliberately bid high on the item for which thequantity was underestimated? In this case, how is a subcontractorlikely to bid on the other (accurately estimated) items?How does a developer assess the accessibility of a prospectivedevelopment site?