Excluding lines of credit that one can acquire through a bank, do specialty lenders exist that just lend out to just RE developers that need capital for the GP piece of the equity stack? I know its fairly common for seniors at PE shops to draw on a line of credit at a bank to commit capital to their own portfolio investments, so I'm curious as to how this works in the RE development world
What are the usual terms of these types of loans such as rate and collateral? Do developers use them often? Is it a competitive market place where pricing is efficient?
This may be common knowledge, but any information on this would be appreciated. Thanks.
Only specialty lenders. In short, it's a mezzanine cost of capital (since it's mezz risk), and there has to be asset diversification.
PM me if you want more specific details.
Like you said, I know of GPs/developers who have used lines of credit (secured by their residence or or other investments) to fund their equity contribution for a deal... Curious about what the business model would be of lending specifically for this purpose? As a lender here, aren't you picking up all of the risk and limiting your upside? I'm sure it would be recourse debt, but if someone's borrowing to fund their equity there, then I don't think it's an outlandish assumption that there would be other creditors in front of you for their hard assets if things go south (see above)...
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