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OCTOBER

2 0 0 8
Issue 21

An online magazine about investing, living, working and relocating to the Caribbean.

EDITORIAL

Ramblings, thoughts and occasional sense from the Eastern Caribbean >>

HOT OFF THE PRESS

Events and news from around the region >>

SUSTAINABLE LIVING

Sharing resources and best practices >>

TOURISM TREATS

Updates on Caribbean tourism, conferences>>

DID YOU KNOW?

Interesting stuff, websites, facts and more >>

Funding and finance for large developments

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Journey To Belize
Costa Rica : A Home Buyer's Guide
An American In Havana
Hidden Gems : Caribbean Caves
Nicaragua: A Majestic Paradise Part 2
St Lucia : Colonial Creole Country

COUNTRY FOCUS : DOMINICAN REPUBLIC

The Dazzling Dominican Republic

Dominican Republic : Business is Booming

Dominican Republic : Real Estate Haven

MONEY PAGES

Mortgage Matters Good advice on mortgaging your Caribbean dream and retirement home >>
Investors and Funding Insider knowledge on funding for your developments >>>
Passports to Offshore Security Economic citizenship, 2nd passports, protecting assets >>

PROPERTY PAGESS

Caribbean Investor And Owner Notes News and opportunities from CaribProperty Club Notes>>
The Rich Report Offshore insights from a Manhattan realty guru>>
Off-Plan Pre-Development Offers Our recommended deals from the best developers >>
Pick of the Month Editor's choice of interesting business and real estate opportunities >>

M O N E Y P A G E S

INVESTOR'S FUNDING AND FINANCING
An insider's views and tips on where and how to find funding for
development projects, large and small.

This is a stirring statement to start a new column with...but we in the financial world find ourselves in stirring times!!

Developers MADE money, now use it – Properly!!!

Apart from developers who enjoyed buckets of cheap funding over the past 5 years, few people believe banks have looked after their clients best interests during this period.

Journalists across the globe are blaming bank's past antics for today’s weakening economies and the resulting deficient lending practices that are having a detrimental effect on almost all sectors of real estate - residential and commercial.

Even the Caribbean is feeling the funding pinch with fewer Americans and Europeans able to secure mortgages. Volume sales are certainly hampered.

Recommended Sidestep For Developers...

There is absolutely no time for hesitation, it is definitely time for lateral thought from developers keen to remain in the game. Experience suggests this is a sensitive and common process for most developers, but many I suspect, will feel rather uncomfortable with my advice.

Solutions are far more variable and simple than most will contemplate.

Are you one of those entrepreneurial developers who bought as much land as you could acquire during the good times and built upon the right proportion during the past 5 years, you should still have land assets (some free & clear)? And, if you were super-prudent, you placed an intelligent proportion of profits in places where it can be liquidated smoothly and efficiently?

If your answer is YES? Then please read on.

For the people who mutter to themselves NO, you seriously need to read on ...and be ready to confront the subsequent issues.

Between now and September next year, always provide a short-form executive summary which includes a strong statement of cash and physical assets to the organization you expect to provide the funds.

Those which come across my desk rarely bother to show or offer much in the way of collateral. It’s as if developers think it’s either totally irrelevant or something to be hidden at all times from the financial world. (We’re not Taxmen for goodness sake!!!)

The prime reason for declaring prospective assets is to show what a clever chap you’ve been in the past and why funding will be well planned and executed through your very capable hands.

Equally, by listing these assets it is often possible to gain 100% funding with only a joint reserve account holding the developers own funds until he has made sales and can pay the accrued principle and interest without touching the original capital or assets.

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100% funding without some form of default back-up is just not feasible in today’s market.

Accept this and move forward with skill.

The fact that these funds are hardly ever called upon leaves a developer in a stronger position. After all, they can now walk away with not only 100% full funding for their new project, but also, their own capital remains safe and secure – most often in their own bank.

One obvious place to avoid nowadays is high street banks – global or otherwise.

Unless you have connections at the top, you need to be talking with the right people in the private and investment sector bank operations and for most, this will never be possible for reasons I’ll not expand upon here.

Every developer should be ready to provide as much ‘current’ documentation from a truly independent source as possible and, where necessary, be prepared to meet the banks due diligence costs.

When choosing a consultant / broker to find the most appropriate funder for your project, always ask for a clear statement in advance of preparatory work covering fees, costs and who pays them and when, etc. If you think it’s unreasonable, it probably is and, in which case, withdraw from further discussion.

Funding is important to the very survival of developers, so take the time to prepare your documentation when asked. Usually, a consultant / broker will provide an Executive Summary to be completed by the applicant. Remember this very simple document is meant to remain simple to ensure clarity and ease of understanding for an underwriter - or anyone else reviewing its contents.

Forget about flowery sales language.

Concentrate upon hard facts and figures but with less emphasis on profit margins. Though important, previous success and an indication of established assets feature higher on the list of deciding factors than what your company’s ROI might be.

Infiniti Blu Development in Dominican Republic

Infiniti Blu Development in Dominican Republic

Of course, if the developer can raise say, US $5M or more, it is time to look in a different direction and make money off-site, in advance, quickly and safely by taking advantage of methods only available to those with larger funds.

Sadly, it is neither permitted nor wise to discuss these issues in print. We don’t want a plethora of internet scammers attempting to cheat their way to victory on the back of this or any other article covering funding. There are already far too many impoverished souls exploiting developers made vulnerable through market circumstance.

Meantime, the type of funding to which I refer carries absolutely no upfront fees.

Lawyers and Financial Advisers are entirely welcome and all contracts are signed within the HQ of the ‘AAA’ financial institutions involved. Moreover, all transfer of funds takes place directly - bank-to-bank - in either direction and at all times throughout the transaction.

Time to ‘digress-to-progress’...

Another route for perhaps those who muttered ‘No’ is to accept a Joint Venture partner.

Unquestionably they’ll want as much of the profit as can be negotiated. Though many developers begin by flatly rejecting this option, after wasted months, many accept the notion that, without this kind of support, their project is destined the way of all flesh.

I would strongly urge anyone in this situation to give ‘serious’ thought to their proposals. Even if they do take the bulk of the profits on this occasion, it will most likely leave each developer better placed to gain the seed funds they lacked for their current project for the next time round.

In today’s market, investor's telephones are hot with calls from numerous sources all praising this or that project. To go it alone is rarely an intelligent option when negotiating with a seasoned J.V partner.

Once again, leave it to someone who’s negotiated terms for these types of projects before. A good consultant / broker is used to working with different bands of investor group.

And finally; if you are also experiencing difficulty in raising preferential mortgage funding for your home buyers, well, once again, for those with sufficient capital in support, a simple and highly rewarding method exists to provide a magnificent mortgage solution for your clientele.

AUTHOR : Brian Curtis, Head of Operations, OPD.

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