Monday, March 3, 2008

Procuring Debt Financing

I get a fair amount of questions about what it is I do.

One of the services I organize and have been involved with for the past several weeks involves the procurement of debt financing….which on this project involves the debt during construction and then ultimately the permanent debt. So, this service involves explaining the project in terms that debt financiers understand, such as a schedule of prospective cash flows and a schedule of sources and uses of capital.

I use a real estate modeling program known as Argus, and various models of this transaction have been on the table for well over a year. The final one was prepared today and will be tweaked tomorrow.

One of the sources of capital is Net Operating Income (NOI) that is driven by operating revenue and that is reflected in a lease. So, beyond the preparation of the financial projections, I also worked with outside counsel to structure the leases (which debt financiers would want to see). Too, I negotiated the contract for construction and then had that expressed in a contract and that too was sent along to the financiers.

So, we received proposals from 6 banks and they were all competitive. Now I am involved in understanding the final offerings from three banks and I suspect this whole process will conclude this week.

I have not been asked to obtain equity on this project, but I also have the ability to bring equity investors into a project.

No comments: