Use My Equity - Part 1

How often do you wonder about the added yield potential of the free and clear property and/or other equity sitting dormant in your portfolio?

Many times, developers, investors and/or business owners (hereinafter called the “Sponsor”) are short on capital to get quality deals funded. The banks or other lenders may have shown interest in funding a loan, but need additional collateral in the transaction through credit enhancement, additional income for debt service etc.

The marketplace possesses a tried and true method of raising this capital, but not in the conventional way.

There are literally tens of millions of dollars of unused equity in the marketplace available that can be unlocked and used by Sponsors to help close those deals.

But why would an entity (hereinafter called the “Provider”), content in ownership of its free and clear property/equity, have any interest in becoming involved in a transaction such as this.

There are a multitude of answers why the Provider may wish to unlock this unused or underused equity to further enhance investment yield, change benefits, split partnerships etc. etc.

First of all, as a passive Financial Partner, the Provider can use its asset(s) in a number of additional ways, including:

• Joint Venture;
  
• Loan or Pledge Title;
  
• Asset Exchange;
  
• Create a Mortgage against;
  
• Etc.
  

• Shares in Sponsor’s Development;
  
• Some cash + shares in Sponsor’s Development;
  
• Income producing paper (i.e.: mortgage(s), preference shares etc.,);
  
• An asset class more fitting for the Provider;
  
• Many more creative solutions.
  

First of all, it is noted that concepts are consistently the same regardless of whether we are dealing with a Provider’s small residential lot or a large multi-national corporation’s head office.

Think about your portfolio and these various equity options.
Cash, Office/Retail/Commercial, Mortgages-Notes, Multi-Family, Assisted Living, Vacant Land, Home(s)/Condo(s), Retail Commercial, Business(s), Recreational/Resort Properties, Cottage(s), Hotels/Motels, Mini-Storage, Motels, Multi-family, Mobile Home Communities, Campgrounds, RV Park, Condominium(s), Farms/Ranches, Timeshare Membership, Interval Ownership, Building Lots, Agricultural Property etc.

To this can be added personal property etc. etc.

Creativity does not replace sound required due diligence by all parties in anticipation that all participants come away with better benefits than previous;

Enhanced creativity may require further tax planning.

Next time, we will share a selection of historic, transaction closing ideas, through various “USE MY EQUITY” formulas.