“Lenders want to work with people they trust,” says Jim Tadeson, Founding Partner in Carttera Private Equities Inc.
Getting the right group of partners together for a project can make all the difference to its success. Those who demonstrate expertise in specific types of projects or strong local knowledge are sought after by lenders, land-owners and commercial partners alike.
“Joint-ventures can be fraught with peril, but if you have the right people together bringing complimentary skill sets that’s the best outcome,” says Tadeson. “It can often be a happy relationship. Both parties need to have reasonable amounts of skin in the game, a reasonable amount of at-risk money. The skill sets need to be complimentary.”
Partners will seek out people they trust for new projects and lenders are setting stricter criteria and reducing the number of borrowers with whom they’ll work.
“They want to work with people that they’ve worked with before. They want a bigger balance sheet out of every borrower. In commercial projects, they want a higher level of pre-leasing. If it’s a condo project, they want a higher level of pre-sales. It’s tougher to get construction financing, which is going to really temper the pace of development and take a lot of undercapitalized guys out of the market. It will be very difficult for them to get financed or low-rates. It’s a relatively new phenomenon. Credit is not available as it has been.”
Note: This article was published on p 54 of Canada’s Leading Real Estate Forum Magazine, Toronto, Winter 2012.
