It is important to design deals around realistic project proformas and development timelines with an adequate exit sale price & cap rate, project cost and duration cushion. Most capital partners see lots of projects and are in tune with what is going on in the market. It will add to your credibility by presenting realistic numbers from the get-go. Always err on the side of conservatism. Financing deals have a much higher chance of getting done and projects funded when structured in real terms without a bunch of fluff. Capital partners are smart enough to see through that at the get go and you don’t want to lose credibility.
Projects continually morph and evolve so work your development projects hard and keep your capital partners informed on a timely basis. While you don’t need to go into daily ups and downs, you do need to keep investors informed on project progress and about any significant hurdles that may have arisen. When covering a problem describe how you are proactively working to manage through to overcome the obstacle. Being a good problem solver is essential to becoming a successful developer. Most capital partners will work with you even when development high hurdle issues present themselves. Often challenges will come up, and unfortunately sometimes it may be later in the process. Just be very transparent. Nearly every project is going to have a “bear trap or two” that you will need to navigate around.
God and the devil are in the details. Put on your deep detail analytics hard hat and drill, drill, drill down comparing and contrasting details you find in term sheets, operating agreements, proformas, profit potential and risks under each capital option. Look at it from all angles and really get to know the comparative pluses & minuses just like you do when making the project a go or no-go decision. Taking the time to bring into clear focus the big, mid, and even lower-level financing picture is important if you are going to dial right in on the best capital market solutions.
These capital market management notions are just some to keep in mind. There remains a ton more capital structuring details and decision-making considerations; too many to delve into in one short writing on the subject. Your best next move to ramp up project financing knowledge is to select a financing expert consultant to guide you forward as you work to become a bit of a financing wizard yourself. Applying intelligent financing knowledge can make a world of difference to your company’s future development success. One never knows when entering the capital rabbit hole what the final exit strategy may look like. Good luck and good hunting.
