We were approached by a man we’ll call Joe, for the purpose of anonymity. Joe came to us pre-approved by a bank (the vision was solid, good credit, strong team, amazing liquidity, the works). The bank wanted to take out the land, the vertical, and possibly handle the long-term financing. You may be wondering, if he had his cake and was about to eat it too, what does he need from Sovereign Capital? Long story short, he wanted higher leverage in the form of a second lien. We found him just that.

About a week after initially approaching us, we had terms for a $7,000,000 second in the form of CPACE financing; which meant tax write offs, a potentially assumable loan and great terms. For those of you who don’t know, CPACE financing is an amazing vehicle for allowing commercial property owners to fund 100% of energy efficiency, renewable energy, and water conservation projects with long-term, low-cost capital. However, as closing approached, the process began to stall. Deadlines weren’t met, communication slowed, and the sponsor started to lose confidence that the deal would close when it needed to. Anyone who has worked on large real estate transactions knows this exact feeling, and what usually follows.

So rather than sitting and waiting, we decided to explore alternative capital solutions.Through our network of investors, we identified a capital partner interested specifically in the land acquisition portion of the project.

From the time we engaged on the transaction to the final closing, the deal was completed in under 60 days. The sponsor secured the land, the project stayed on track, and the uncertainty surrounding the original financing delays was removed. We were also able to give him 60% on the purchase price of the land, which is more than the bank.

This is the value of flexible financing.

Traditional banks play an important role in real estate development, but they are not always the fastest or most flexible solution, especially when timelines tighten. In situations like this, having access to alternative investors and private capital sources can make the difference between a stalled deal and a successful closing.

At Sovereign Capital and Investments, our role is to help sponsors find the right capital solution for their situation, whether that’s traditional financing, private investors, or alternative lending.

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