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Land Loan: Acquisition and Residential Construction

Financial Compound arranged an $11 million land acquisition and development loan facility for a 45 home subdivision in Orlandlo, Florida.  The borrower projects an average home sale price of $350,000. The homes are intended to be used as vacation rentals with the foreign owners living in the home two months of the year and rented out the other ten months.  This transaction represents the first deal for this new homebuilding venture comprised of a financial partner, a semi-retired homebuilder, and a local vacation rental development project manager in Orlando.  Due to the borrower’s limited experience as a principal developer in the trade area, Financial Compound persisted for more than two years to complete this financing.

Land loan terms included 85% of land A&D cost and 100% of the homebuilding cost, with a floating interest rate of Libor plus 4.25%, reducing to Libor plus 3.75% for the construction revolver, 24 month maturity, Lender fee of 1%; 125% accelerated releases as lots move into the construction revolver, along with a 10% pre-sales requirement.