How do the REALLY big deals come together? - Posted by Mike

Real Estate Investing Office
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Posted by StevenS(CPA) on August 09, 2007 at 09:26:26:

The really big deals usually come from the realy large players. Hedge funds, institutional investors, insurance companies, pension funds, ect. those are the players with lots of money in their pockets and plenty of resources at their disposal.

But it takes a lot to get their attention and you need to come to the table with some deep analysis of the property and your team needs to have a great track record for doing thse kinds of deals.

But this is a money and people business like anything else. And good deals and solid presentations can usually open doors. If not with the big player at least put you in contact with someone who will play.

I hope this helps.

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How do the REALLY big deals come together? - Posted by Mike

Posted by Mike on August 09, 2007 at 05:40:45:

I’m wondering if anyone can give me a little insight as to how the “whales” in commercial real estate do deals. What I mean by that is, those that do deals in the $50MM plus range. I mean it can’t just be that you go down to one of the banks you have a relationship with and ask for a loan of that size. And, where do you they get down payment money, or for that matter, is a down payment even needed at that level? I would think when your dealing into multi-multi-multi-million dollar deals, you have many banks coming together to do a deal.

Anyhow, it’s not like I have anything brewing at that size. I’m just curious as to how the really big boys do business.

Thanks.

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Re: How do the REALLY big deals come together? - Posted by Frank Chin

Posted by Frank Chin on August 11, 2007 at 04:34:11:

Mike:

Large deals are done a bit differently.

First, the investor and lendors are not really thinking “no money down”, but thinking in terms of a the overall impact of a “deal”, and who benefits?

Second, equity and debt are sometimes blurred with “equity kickers”. Often, lenders such as insurance companies, can invest and own a deal on their own, so why let the investor do no down, take all the risk, and no gain on the upside. With 'equity kickers", they take some risks, and participate on the upside.

But the biggest difference when putting a development deal of this size forward is the participation of local, and state governments in the areas of:

  • Grants for things like job creation.
  • Direct Loan guarantees.
  • Issuance of taxpayer guaranteed bonds.
  • Eminent domain to take land when needed.

With the above, the lenders can take far larger risks. And if such a deal can be put together, there is really no lack of people looking to particpate with a down payment.

But you’ll need to do the homework, crunch the numbers, prepare good presentations, with the reward that lenders would even cover “expected negative cash flows” that arises from new developments in the early years.

However, you’ll need a seasoned developer to lend credibility, a polictian in the group that can make the needed phone calls, and pull strings when needed.

Indeed, not long ago, a developer who bought an old office building in Manhattan to rehab, and got the MTA, a state agency to lease space there, got retired NY Senator Alphonse Amato on its staff. This little fact got into the news new the rehab went way over budget, years behind schedule, and the state agency was stuck with he the added costs. The ex-senator was allegedly paid several hundred thousand dollars, and it turned out it was just to make two or three phone calls when the agency (the customer) started complaining. Senator Amato did his job, he called the MTA, told them to shut up and stop complaining.

Frank Chin

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Re: How do the REALLY big deals come together? - Posted by Barry Brooks

Posted by Barry Brooks on August 09, 2007 at 18:42:14:

How do I get payed for finding raw land and plip it to another buyer and get payed with out any of my own Money? I am in Austin Texas

I have done this and the buyers realtor is saying he will not pay us any money at all…

What can I do?

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Re: How do the REALLY big deals come together? - Posted by Doug O

Posted by Doug O on August 09, 2007 at 10:43:18:

The big deals that I’ve been privy to generally are made up of several large investors…
What I’ve seen was that a development group gathers a pool of investors, and essentially sells shares in the project (similar to buying a REIT stock on the NYSE)… There is a projected return, etc., etc., and a minimum holding period (basically locking in investors)… All the ones I saw had a max of 5 year exit plans, and upon sale, all the proceeds were returned to the original investors… I actually know someone who puts together deals like this all around the country for a living… I’m sure there are many companies that do this as well…

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Re: How do the REALLY big deals come together? - Posted by brandoncbsre

Posted by brandoncbsre on August 09, 2007 at 08:45:26:

I would imagine that a lot of the larger deals are financed by multiple banks or through the use of a REIT or insurance company. I have to agree that there would have to be some equity in 20-30% range. I have a buddy that works with a title company and I know he has worked on deals in 3-5 million range with multiple banks involved.

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Re: How do the REALLY big deals come together? - Posted by Patrick S Lawson

Posted by Patrick S Lawson on August 09, 2007 at 06:08:33:

Most times the deals are a mix of debt and equity. The debt peice may be 70-80% of the deal and the equity may make up the remainder.

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Re: How do the REALLY big deals come together? - Posted by Bill Hebert

Posted by Bill Hebert on August 17, 2007 at 12:55:31:

Perhaps you could work with one or more commercial real estate investors and have them pay you a “commission” or a “participation” in the projects that you find for them.

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Re: How do the REALLY big deals come together? - Posted by Johnathon Davis

Posted by Johnathon Davis on October 10, 2007 at 11:55:14:

Doug, I’m involved with a high end oceanfront development in South Florida. Owners have a great plan, 6 figure lot deposits, but are running low on cash until zoning complete. Joint venture. Please connect me to your friend.

Thanks