Prior to the recession, development projects were everywhere as the industry had developed considerable demand over the last decade.
But when the recession hit, a considerable chunk of the money going into these development projects dried up and still hasn’t returned to the market.
The result has been a combination of out right development failures due to lack of capital and developers desperately searching for capital to keep their project alive and equity in the project in tact.
For the sources of money that do exist for development project financing, they basically have their pick of projects to go into and full bargaining control of what they want in return.
To say its a lenders market would be a gross understatement.
At the same time, regardless of the economic climate, good projects will always be able to find money. And when I speak of good projects I’m talking about a development project that 1) has a good location; 2) has demand in place for the finished project; 3) is well organized and managed; 4) has control of all the essential elements required to proceed; and 4) possesses all the required zoning, licensing, and regulatory requirements to proceed.
For projects that are missing one or more of these elements, money is going to be harder to find due to the existing unknowns. And the money you are likely to find will price the uncertainty into their cost of funds or most likely will not consider the project at all.
Now with interest rates threatening to go up, the economics for some projects may be falling out of reach.
With all this being said, there still is money available for development projects. Its just harder to find and harder to secure than in years past.
In order to increase your chances of success, one of the keys is to select a construction financing expert to work with that has direct access to active development project lenders and who has a track record of getting funding in place.
If you are in the process of planning out a land development project, or are in the middle of one and require development project financing, I suggest that you give me a call so we can go through your requirements together and discuss different construction development financing options that may be available to you.