![Re-Capitalizing in 2024!](/static/img/background/background.jpg)
Re-Capitalizing in 2024!
![Re-Capitalizing in 2024!](/media/blog/preview/preview_95.normal.jpg)
With the continued onset of interest rates, insurance costs, required interest cap purchases and pricing of goods and services left over from the last 15 months, many GPs/Sponsors/Managers are trying to figure out how to re-capitalize until (i) cap rates decrease; and/or (ii) interest rates decrease (both of which will help multifamily economics). Considering that over 70% of Kaliser & Associates PC's legal practice is spent amending PPMs, drafting corporate resolutions/meetings, advising on lender defaults and (YES) structuring enticing capital calls and other mechanisms to bring in “rescue” capital, we thought some general methodologies, might be helpful.
Top 10 Methodologies:
- Unsecured loan to company
- Capital Call per Company Agreement
- Create a Preferred Equity Class
- Offer some of the GP economic upside as incentive for capital call
- Add a preferred return to existing Classes (possibly retroactive to initial investment) as incentive for pital call
- Combo of #4 and #5
- Reposition loan (rebalance with lender)/loan modification
- Forbearance of mortgage payments with lender
- Refinance
- Supplemental Loan on top of 1st loan
There are “pros” and “cons” with each option. Some need membership approval, lender approval and/or no approvals. All options should be discussed with members via a webinar with high-level projections and lay out the options and consequences in the webinar and ALWAYS have a “next steps” and definitive "timeline".