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$90,000,000 Projected Gross Sales for 2 Entry Level Residential Tracts - GSP has arranged Joint Venture Equity for adjacent sub-divisions totaling 600 homes in the Coachella Valley: An Institutional Equity Fund specializing in residential development has provided a two-stage funding consisting of: (1) $500,000 for a non- refundable deposit and the pre-development working capital (money was funded within 3 weeks of the GSP submission) and (2) $7.0 million which was funded to acquire the land upon approval of the Tentative Map 4 months later. During the initial 3 week underwriting the investor under-wrote both projects, the developer and visited the properties and negotiated, documented and executed the LLC structure for the pre-closing funding and land acquisition. Investment Structure: Non-recourse LLC with the Equity Fund providing 90% of the equity. The investor is "the managing member" and the developer is the "development member". The initial funding included $250,000 for the non-refundable deposit that was passed through to the seller and the remainder was allocated to fees and plans. The land purchase price was $6.7 million and was funded prior to the commitment of the A&D and the construction loans. It is expected that the life of these projects will be approximately 5 years. Project Overview: (1) 2 sub-divisions wrapped into one for marketing purposes; (2) Entry level with "destination pricing" where 2 people earning $10/hr can afford to purchase; (3) Single family detached; (4) Lot sizes ranging from 6,000 to 6,500 s.f; (5) Home sizes from 1,200 to 2,100 s.f.; (6) Price range $134,990 - $186,990 (7) Highly competitive market with direct comparables where investor liked entry level characteristics and developer experience with product niche. Terms: (1) Developer receives fee of 3% of gross sales payable 2% pro-rata during construction and 1% at sales closing; (2) Investor receives 1% of gross sales payable pro-rata during construction for management and oversight responsibilities; (3) Equity return 15% pari-passu on 90:10 basis; (4) 50:50 thereafter. HOT MONEY ALERT! Investor Capacity for New Deals: (1) $200 million equity in the Western U.S. in 2003; (2) Any type of residential project; land development, master planned community, single family tracts, mid-rise condominiums, note purchases and land entitlement plays; (3) Philosophy: If someone will live there and it is not a hotel, time-share or resort, "they will look at it"; (4) $2 million minimum equity per transaction with no maximum; (5) Program targeted to established developers including individuals that have experience and are on their own for the first time but have demonstrated experience with another company; (6) Like 45 days to underwrite and fund although can be quicker if necessary - much quicker if this is not the first project with the developer; (7) Decision making based 70% people, 20% business plan and 10% project. Once they have underwritten a developer, it is easy to underwrite the project; (8) Prefers 1st and 2nd time "move up" buyer and tries to stay away from luxury end of the market; (9) Decision making is made in-house; (10) Will give level of interest within 72 hours and move very quickly after that. (George Smith, Joel Simaie)
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