In a world where the options of working with a capital funding firm are many, it is important to make sure that your company is vetting appropriate partners for your business needs. In order to do this, it’s imperative that you are aware of what to look for not only in terms of your own needs but also what your potential partners can offer your business.
Are they able to fulfill your capital financing needs to the fullest extent, or will working with them cause you to look for financing elsewhere in the long term? Land Advisors Capital Advisor Waseem Hamadeh discusses the specifics of courting capital and finding the right financing for your business ventures.
First and foremost, capital brokerage firms or correspondents need to understand the direction the developer or sponsor is looking to go with their business. If both parties are aware of the end goal, they will be better equipped with tactics and strategies on how to get there. Growth and expansion plans also play an important role when communicating plans with a possible capital partner.
The more specific the plans are, the more apt your capital partner may be in helping to fulfill the needs of your company. The firm you choose to work with needs to understand your current capital stack and future needs.
Both the capital brokers and the firm need to understand the industry in which they are planning to work in. Just because capital is available does not mean the wrong partnership needs to be formed, thus the importance of choosing the right partnership—alignment of culture is imperative. Depending on the asset class, different expectations need to be set along with timeframes to exit and alternative options being given to the client should their needs change.
Capital brokerage firms like Land Advisors Capital need to be able to assist in financial modeling and understanding the best way to lower the clients effective weighted cost of capital through financial engineering, potential off-balance sheet structuring and methods currently being used with many of the publics to increase return on equity.
Sometimes companies may opt to work with multiple capital firms, but more times than not it would become more beneficial to work with a single firm that is able to handle all aspects of a business’ needs. Any intermediary needs to have multiple capital sources throughout the capital stack, traditional debt, equity, and mezzanine financing available can be facilitated through one singular capital partner, should you find one that best suites your business needs.
Cultural alignment is important in a world of many capital sources chasing deals. Certain companies operate on their own and are not accustomed to institutional style capital sources, others prefer institutional options for growth and positioning. Deciding which style would suite your business and its needs the best is crucial to your financing needs.
Land Advisors Capital has relationships within all tiers of the capital stack even going as high as 90 percent LTV and equity partners that understand that their relationship is more than capital but an advisor and strategic partner for future growth. It is important for the advisors to build relationships with the clients in order to continue to partner with them, not only during periods of growth but well before the growth period in order to become more strategic with their plans.
Some investors have placed debt in longer dated land plays, equity in multifamily projects, Masterplan Re-capitalization, Joint Ventures, partner buyouts, rolling lot options, equity placements in homebuilder operations, and even acted as an advisor and facilitator to homebuilders in M&A activity.
By being well-versed in different aspects of the industry, this type of capital partner can become more versatile especially as your business grows and ventures into new territories where your needs may grow or change completely, depending on the stage of your business.
Any partner someone chooses to work with needs to have the flexibility of going from $2,000,000 all the way to north of $100,000,000, in different forms from multiple sources of equity placement and debt. Being able to raise these funds is the nuts and bolts of the whole deal, essentially.
Waseem Hamadeh brings more than 13 years’ experience in real estate brokerage, investment and finance to Land Advisors Organization. His background includes experience as a senior short sale analyst at Bank of America Corporation, managing a portfolio of 400 properties across the continental United States; and has been involved in over $1 billion dollars in land transactions within the last 60 months at Land Advisors.