Participating financing is a hybrid area specifically structured for each real
estate transaction. It is a hybrid in that it takes the place of debt – either
senior or secondary, but performs the function of equity. It provides high
leverage for a transaction, often to 95% of cost, which then replaces most
of the equity required while being debt on the collateral, not part of the
ownership. The participating portion means that upon the payoff of this debt,
a portion of the projects profits are paid to the Investor along with the
original debt investment.
The participating debt structure is often less expensive to the developer,
replacing equity requirements of 50% or greater of profits with debt participation
that typically is in the 20% to 30% range. The trade off is that equity cannot
foreclose on a project, but debt can. The lower cost but higher leverage
issue is one best discussed with your Account
Executive to determine
what is available
and best for the project.
debt may be non-recourse and is dependent upon the project, borrower
quality and experience. While nationwide in scope, most investments
are limited to major population areas. All property types are considered,
including land acquisition and development which is very often a good
candidate for this type transaction.
contact an Account Executive
and terms subject to change without notice