($27.12MM Debt / $17.98MM Equity)
The Situation
This transaction was executed during a period when traditional build to rent lenders were actively pulling back, instituting moratoriums, and declining new construction exposure.
Key challenges included:
- The developer’s largest build to rent project to date
- A tertiary Florida market
- A mid-process general contractor change, requiring full re-approval
- A loan commitment extension required after the bank’s CEO imposed a construction moratorium
Skylatus’ Role
Skylatus was engaged as the lead capital markets advisor and execution partner. We were responsible for raising debt & equity, maintaining lender and LP confidence, navigating contractor risk, structuring solutions, and quarterbacking the transaction through closing.
Key Contributions
Execution & Risk Management
- Organized comprehensive market tours by car and helicopter for capital providers
- Maintained multiple lender options to preserve leverage when lenders pulled back
- Worked directly with the appraiser to support a favorable valuation outcome
- Reconciled costs paid to date and reviewed budgets to prevent future capital shortfalls
- Coordinated insurance advisors, lender, and LP to bind the most favorable acceptable coverage
General Contractor Crisis Management
- Researched, sourced, and bid multiple Florida-based GCs
- Built apples-to-apples GC comparison models
- Personally met with the new GC’s CEO/founder and vetted the firm
- Authored an 11-page memo to the LP defending GC selection
- Hosted the LP onsite in Florida and personally drove a 15-passenger van to tour the GC’s offices & active job sites
- Structured and negotiated a tri-party GC agreement acceptable to all parties
Capital Preservation
- Negotiated a cost-plus contract rather than a GMP contract, reducing embedded cost padding
- Eliminated bonding requirements and negotiated letters of credit in lieu of bonds
- Structured GC provisions allowing the developer/LP to participate in buy-down savings
- Analyzed interest rate cap and swap options
- Negotiated guaranty burn-offs (50% at CO, 25% at stabilization, and defined stabilization with precision)
- Achieved no reserves, no escrows, and no other lender participation required
Economics & Structure (Select Highlights)
- Leverage: LTC calculation included implied land equity which increased leverage beyond lender’s LTC stipulation
- Waterfall: No preferred return; land equity payout
- Debt Flexibility: Option to fix rate via swap; rate reduction at stabilization
- Risk Mitigation: Favorable DSCR definitions and construction overrun protections
Outcome
Despite severe lender pullback, a GC change mid-process, and a construction moratorium at the bank, the transaction:
- Closed successfully
- Became the final construction loan completed by the lender
- Preserved favorable economics and execution flexibility for the developer
- Demonstrated Skylatus’ ability to get deals done when others cannot
FAQs
1. How do you secure ground up construction financing during a lending moratorium?
When banks institute construction lending moratoriums, certainty of execution drops significantly. Skylatus mitigates this by running a broad, competitive process to maintain multiple viable lender options. In this Central Florida case study, our rigorous underwriting and proactive risk management convinced the bank’s executive team to extend an expired commitment letter, making it the final construction loan completed by that lender.
2. What happens to my build to rent financing if I need to replace my General Contractor mid-process?
Changing a General Contractor during the capital raising process typically triggers a full re-approval from both the lender and the LP equity provider, threatening the deal’s timeline. Skylatus steps in to manage this crisis by sourcing and bidding new GCs, building apples-to-apples comparison models, personally vetting the new firm, and authoring detailed memorandums to investment committees to defend the selection and preserve capital provider confidence.
3. Can you structure commercial real estate loans in Florida without requiring a GMP contract?
Yes. While many lenders prefer a Guaranteed Maximum Price (GMP) contract, it often embeds unnecessary cost padding. For this transaction, Skylatus successfully negotiated a cost-plus contract that reduced inflated costs, eliminated traditional bonding requirements in favor of letters of credit, and structured provisions that allowed the developer to participate in buy-down savings.