Re: [carfree_cities] Financing
- --- Ronald Dawson <rdadddmd@...> wrote:
> James Rombough wrote:Both: venture capital for construction, and LEM for
> >As bad as capitalism may sound to some folks, I
> >big profits for a developer is the only way to get
> >carfree cities started in a reasonable amount of
> >(depending on the level of government
> >Big profits in any industry draws more suppliers,
> >the more suppliers you have (i.e., developers), the
> >more carfree cities you have.
> Are you thinking along the lines of venture capital
> or maybe even using
> L.E.M's (Location Efficient Mortgages) for starters?
individuals purchasing the property. Not everyone
will need a LEM (same as a regular mortgage but with
higher borrowing limits), but I can't think of
anything other than venture capital for the
construction (and planning and all that stuff). Not
being a finance expert, this is my guess.
Do You Yahoo!?
Get Yahoo! Mail - Free email you can access from anywhere!
- Regarding the financing discussion:
Real estate projects are generally undertaken by developers.
These guys have to have some of their own money to put into
a project, typically somewhere in the range of 10% of total
costs. The remaining money comes from banks under a variety
of loan packages.
"Contruction loans" are just that--temporary loans to a
developer to build the agreed project. "Carrying loans"
are issued after the project is finished, to tide the
developer over until all or nearly all of the space has
been sold. Both of these types of loans are typically at
quite high interest rates.
The next project we want to build is a full-sized carfree
district, with a population of about 10,000 plus stores
and workplaces for that many or somewhat more people. I
estimate that this will cost about $1 billion. That means
we need a developer with $100 million. (In really large
projects such as this one, it might be possible to get the
banks on board at a 95% level, if they can be convinced
of the viability of the project, which will in itself be
something of a trick, since bankers are nothing if not
conservative--they understand sprawl and how you make money
Of course, with big projects, it's not unusual to have more
than one developer involved, so we don't have to find a
single developer with $100 million, which, while not impossible,
is a bit of a stretch.
"Venture capital" is normall for the establishment of new
businesses and not for real estate development.
J.H. Crawford _Carfree Cities_ ISBN 9057270374
- "J.H. Crawford" wrote:
>I have wondered if some of the dot com billions would find their way to
> Regarding the financing discussion:
development. If a developer did not have to borrow to build or support
himself until the units sold, he would be able to call all the design
shots himself. Banks are not going to want to lend money for radical
design like car free. Further, the developer could go into the finance
business himself, lend money only for the purpose of paying for units in
his development. He could write it into the contract that if you need
a mortgage to buy a place in the project, you borrow only from his
finance company. Of course there would be proper safeguards against
discrimination and price gouging. The developer's rates would track
along with other mortgage rates, neither higher which might repel
buyers, nor lower which would set up friction from general mortgage
If the buyers defaulted, the property would go back to the developer.
And he would get all that interest. For years. It would exceed the
profits in the typical borrow-build-sell-pay off cycle. And the buyers
would be able to take the mortgage interest tax deduction.
After some success and defining a building ethic and style, he could
probably go public with it, sell stock to repeat the project. It could
be one of the greenest stocks ever -- car free mixed complexes, with
electrical trolley transportation. Could be it would spread and
consume some sprawl.
- --- Martha Torell <eyrehead@...> wrote:
> I have wondered if some of the dot com billions(snip)
> would find their way to
The dot-com money is looking for a quick profit; real
estate of any type is not quick at all.
What you are describing about the developer being the
lender makes no sense. The developer borrows money,
builds the property, and then sells it. If the buyer
defaults later, the lender forecloses on it and may
have to take a loss (depends on the foreclosure sale
price and the leftover mortgage balance). Why should
the developer care if the buyer defaults?
Do You Yahoo!?
Kick off your party with Yahoo! Invites.