Case Study #3
Montebello, Berlin Township, Camden County, New Jersey
History:
A prominent South Jersey builder with 50 years of experience developing large scale communities was developing a 350 home active adult community. Construction was completed on a 13,000 square foot clubhouse spa including the outdoor amenities. Approximately 70 homes had been sold built when the lender decided they no longer wanted to finance this type of construction.
The Issues:
Based on current sales numbers, the development would take over 8 years to complete. Traditional construction lenders are reluctant to finance more than two years of inventory. A gap existed between what a traditional construction lender would fund what was the true build out value of the development adjusted on an “as is”, current basis.
The Process:
Harvestate Group worked directly with the owners to develop a realistic pro-forma for the project build-out. Harvestate then worked with the owners to identify other non-core assets that could be used as additional collateral to secure an investment of new equity. Harvestate Group identified a group of investors structured a recapitalization that 1) supplied over $6M of new equity to the development, 2) secured the equity investor with additional collateral, 3) brought in a new conventional funding source. The initial lender was repaid in full.
The Fix:
Harvestate Group worked directly with the owners their talented team of professionals to recapitalize an existing active adult community. Harvestate Group manages the investment on behalf of the investor to assure that the project performs as to the pro-forma continues to monitor add value to the development. Today the project is one of the most successful development projects in Camden County. Sales have exceeded pro-forma. The fiscal bottom line is exceeding pro-forma. The project is well capitalized from ongoing operations the homeowners are all thrilled with their community.
Visit this link for more information about this project: www.hovhomes.com/montebello.