($12.05MM Debt / $5.60MM Equity)
The Situation
The sponsor had over 30 years of development experience, but had historically capitalized projects using personal capital and family-and-friends capital, rather than institutional LP structures.
This transaction represented the sponsor’s first transition to an institutional-style commercial real estate equity financing partnership, requiring formal underwriting, third-party validation, institutional governance, and a different cadence of decision-making — all while preserving the sponsor’s entrepreneurial approach to ground up development.
The deal was further complicated by:
- Execution during COVID-era capital market uncertainty
- The sponsor’s first build to rent project
- An emerging asset class with limited lender precedent
- An unbondable, mom-and-pop general contractor
- A tertiary Florida market with limited comparable data
Skylatus’ Role
Skylatus was engaged as the lead capital markets advisor and structuring partner. We were responsible for raising debt & equity, architecting the capital stack, quarterbacking negotiations, aligning lender and equity expectations, and guiding the sponsor through their first institutional capital process from term sheet through execution.
Key Contributions
Capital & Risk Structuring
- Built the sponsor’s first institutional-grade underwriting model
- Structured lender protections including T-6 DSCR, step-down guarantees, and proportionate recourse
- Negotiated phased retainage releases to support construction velocity
- Coordinated feasibility and appraisal strategy to support underwriting assumptions
Equity Alignment
- Negotiated LP approval for the Developer to self-manage
- Structured a sponsor-favorable waterfall with no preferred return
- Monetized implied land equity with payments at closing and within the waterfall
- Engaged directly with the LP investors and supported institutional reporting requirements
Sponsor Advocacy
- Negotiated healthy developer fees, bonuses, and management economics
- Secured lender approval for future funding of developer equity, preserving liquidity and increasing IRR
- Continued advising the sponsor for three years post-closing
Economics Achieved (Select Highlights)
- Developer Fee: 10% of hard & soft costs plus 10% of construction cost savings
- Cash Flow: 50/50 split after a reasonable IRR hurdle
- Leverage: Effective ~70% LTC using land value
- Structure: No LP preferred return; pari-passu distributions
Outcome
Despite launching during COVID, in a tertiary market, with a first-time Build To Rent sponsor profile and an unbondable GC, the project:
- Closed successfully and on schedule
- Preserved sponsor’s long-term upside
- Delivered institutional-quality economics
- Established the sponsor as a credible Build To Rent developer
FAQs
1. How difficult is it to secure a ground-up construction loan in a tertiary market?
Securing a ground-up construction loan in a tertiary market can be challenging because lenders often lack comparable rental data to justify the risk. As a specialized capital advisory firm, Skylatus overcomes this hurdle by building data-driven, institutional-grade underwriting models that prove market viability to credit committees, even in the absence of historical comps.
2. Does Skylatus handle debt and equity placement for first-time Build to Rent developers?
Yes. Even highly experienced developers often need strategic guidance when entering a new asset class like Build to Rent. We specialize in structuring build to rent financing and LP equity for sponsors transitioning from “friends and family” syndications to institutional partnerships. Our objective is to ensure the sponsor retains operational control while maximizing their returns.